Correlation Between Advent Claymore and Profunds-large Cap

Can any of the company-specific risk be diversified away by investing in both Advent Claymore and Profunds-large Cap at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Advent Claymore and Profunds-large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advent Claymore Convertible and Profunds Large Cap Growth, you can compare the effects of market volatilities on Advent Claymore and Profunds-large Cap and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Advent Claymore with a short position of Profunds-large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advent Claymore and Profunds-large Cap.

Diversification Opportunities for Advent Claymore and Profunds-large Cap

0.73

Correlation Coefficient

Advent Claymore  Profunds-large Cap

Poor diversification

The 3 months correlation between Advent and Profunds-large is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Advent Claymore Convertible and Profunds Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profunds Large Cap and Advent Claymore is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Advent Claymore Convertible are associated (or correlated) with Profunds-large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profunds Large Cap has no effect on the direction of Advent Claymore i.e., Advent Claymore and Profunds-large Cap go up and down completely randomly.

Pair Corralation between Advent Claymore and Profunds-large Cap

Considering the 90-day investment horizon Advent Claymore Convertible is expected to generate 0.48 times more return on investment than Profunds-large Cap. However, Advent Claymore Convertible is 2.09 times less risky than Profunds-large Cap. It trades about 0.04 of its potential returns per unit of risk. Profunds Large Cap Growth is currently generating about -0.11 per unit of risk. If you would invest  1,142  in Advent Claymore Convertible on December 29, 2024 and sell it today you would earn a total of  16.00  from holding Advent Claymore Convertible or generate 1.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Advent Claymore Convertible  vs.  Profunds Large Cap Growth

Advent Claymore Conv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Claymore Convertible are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent basic indicators, Advent Claymore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Profunds Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Profunds Large Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Advent Claymore and Profunds-large Cap

The main advantage of trading using opposite Advent Claymore and Profunds-large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advent Claymore position performs unexpectedly, Profunds-large Cap can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Profunds-large Cap will offset losses from the drop in Profunds-large Cap's long position.

The idea behind Advent Claymore Convertible and Profunds Large Cap Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.