Nova/Ursa Ratio

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DEFINITION of 'Nova/Ursa Ratio'

A sentiment indicator based on the Nova and Ursa funds from the Rydex Fund Group. The Nova fund is bullish with a target beta of 1.5. Whereas, the Ursa fund is bearish with a target beta of -1.0. This ratio can be used as a proxy for the direction of market sentiment. More specifically, a high value represents a bullish sentiment and a low value represents a bearish sentiment.

Calculated as:

Nova/Ursa Ratio

INVESTOPEDIA EXPLAINS 'Nova/Ursa Ratio'

For example, A beta of 1.5 means that Nova has a target of 150% of the S&P 500 Index. Ursa's -1.0 means it has a target performance inverse to the S&P 500 Index. That is, if the S&P 500 is down 10%, Ursa should be up 10%.

Rather than just measuring someone's opinion about market direction, this ratio shows where people actually are putting their money.

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RELATED FAQS
  1. How do I use the Nova/Ursa ratio?

    The Nova/Ursa ratio is a contrary indicator designed to gauge market sentiment among retail investors. The ratio gets its ... Read Full Answer >>
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    A bull market is represented by a rising price trend, and a bear market is indicated by a falling price trend. Given this ... Read Full Answer >>
  3. Where did the bull and bear market get their names?

    First of all, let's remember that bears are sluggish and bulls spirited and burly. The terms are used to describe general ... Read Full Answer >>
  4. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  5. How does market risk differ from specific risk?

    Market risk and specific risk are two different forms of risk that affect assets. All investment assets can be separated ... Read Full Answer >>
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    The basic dividend discount model (DDM) creates an estimate of the constant growth rate, in perpetuity, expected for dividends ... Read Full Answer >>
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