DEFINITION of Nova/Ursa Ratio

The nova/ursa ratio is 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, meaning the underlying securities within the fund tend to move more than the overall market. This can be a positive when the market is climbing and lead to extra gains for the holders of these stocks. The Ursa fund is bearish with a target beta of -1.0. This means the underlying securities within this fund tend to move less than the overall market. When the market falls, this can lead to softened losses for investors. 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:

﻿\begin{aligned} \text{Nova Ursa Ratio} = \frac{\text{Total Assets from Nova Fund} }{\text{Total Assets from Ursa Fund} } \\ \end{aligned}﻿

BREAKING DOWN Nova/Ursa Ratio

The nova/ursa ratio is an indicator that can be used as a proxy for the direction of market sentiment. It is calculated by dividing the total assets held within the Nova Fund, a bullish fund, by the total assets in the Ursa Fund, a bearish fund. When the ratio is above 1, it means more people are investing in the fund that will benefit them more when the market is climbing. When the ratio is below 1, it means more people are investing in the fund that may protect them when the market falls. Tracking this ratio can help people keep their fingers on the pulse of shifting market sentiment. The ratio can be valuable because rather than just measuring someone's opinion about market direction, this ratio shows where people actually are putting their money.