Correlation Between American Funds and Profunds Ultrashort
Can any of the company-specific risk be diversified away by investing in both American Funds and Profunds Ultrashort 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 American Funds and Profunds Ultrashort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Inflation and Profunds Ultrashort Nasdaq 100, you can compare the effects of market volatilities on American Funds and Profunds Ultrashort 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 American Funds with a short position of Profunds Ultrashort. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Profunds Ultrashort.
Diversification Opportunities for American Funds and Profunds Ultrashort
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Profunds is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Profunds Ultrashort Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profunds Ultrashort and American Funds 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 American Funds Inflation are associated (or correlated) with Profunds Ultrashort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profunds Ultrashort has no effect on the direction of American Funds i.e., American Funds and Profunds Ultrashort go up and down completely randomly.
Pair Corralation between American Funds and Profunds Ultrashort
Assuming the 90 days horizon American Funds is expected to generate 2.31 times less return on investment than Profunds Ultrashort. But when comparing it to its historical volatility, American Funds Inflation is 8.64 times less risky than Profunds Ultrashort. It trades about 0.11 of its potential returns per unit of risk. Profunds Ultrashort Nasdaq 100 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,486 in Profunds Ultrashort Nasdaq 100 on December 2, 2024 and sell it today you would earn a total of 69.00 from holding Profunds Ultrashort Nasdaq 100 or generate 2.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
American Funds Inflation vs. Profunds Ultrashort Nasdaq 100
Performance |
Timeline |
American Funds Inflation |
Profunds Ultrashort |
American Funds and Profunds Ultrashort Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and Profunds Ultrashort
The main advantage of trading using opposite American Funds and Profunds Ultrashort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Profunds Ultrashort 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 Ultrashort will offset losses from the drop in Profunds Ultrashort's long position.American Funds vs. John Hancock Government | American Funds vs. California Municipal Portfolio | American Funds vs. Aig Government Money | American Funds vs. Access Capital Munity |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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