Nova/Ursa Ratio
What Is the Nova/Ursa Ratio?
The Nova/Ursa ratio is an equity market sentiment indicator in view of the bullish Nova and bearish Ursa funds from the Rydex Fund Group (a subsidiary of Guggenheim Investments). The Nova fund tries to give investment returns that match, before fees and expenses, 150% of the daily performance of the S&P 500\u00ae Index. The Ursa fund is a inverse fund that tracks the S&P 500 index in reverse on a 1:1 basis.
The relative amount of assets in each fund to each other can be utilized as a proxy for the heading of market sentiment. All the more explicitly, a high value addresses an overall bullish sentiment and a low value addresses a bearish sentiment.
How the Nova/Ursa Ration Works
The Rydex Nova fund is bullish with a target beta of 1.5, meaning the underlying securities inside the fund will generally move more than the overall market. This can be positive when the market is climbing and lead to extra gains for the holders of these stocks.
The Rydex Ursa fund is bearish with a target beta of - 1.0. This means the underlying securities inside this fund will quite often move not exactly the overall market. At the point when the market falls, this can lead to relaxed losses for investors
The Nova/Ursa ratio is calculated as follows:
What Does the Nova/Ursa Ratio Tell Investors?
A sentiment indicator is intended to address how a group feels about the market or economy. These market indicators endeavor to evaluate sentiment to foresee what current convictions and positions might mean for future market behavior.
The Nova/Ursa ratio is an indicator that can be utilized as a proxy for the course of market sentiment. It is calculated by separating the total assets held inside the Nova Fund, a bullish fund, by the total assets in the Ursa Fund, a bearish fund.
At the point when the ratio is above 1.0, it means more individuals are investing in the fund that will benefit them more when the market is climbing. At the point when the ratio is below 1.0, it means more individuals are investing in the fund that might safeguard them when the market falls. Tracking this ratio can assist with peopling keep their fingers on the beat of shifting market sentiment. The ratio can be significant in light of the fact that as opposed to just measuring somebody's viewpoint about market course, this ratio shows where individuals really are putting their money.
Highlights
- The Nova/Ursa ratio is a market course sentiment indicator that involves a Rydex mutual fund as the numerator and one more as the denominator.
- The Rydex Nova fund is a bullish strategy while the Rydex Ursa fund is a bearish strategy.
- As assets move all through these funds on a relative basis, it can act as a proxy of investor sentiment.
