Correlation Between Global Technology and Profunds Ultrashort

Can any of the company-specific risk be diversified away by investing in both Global Technology 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 Global Technology and Profunds Ultrashort into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Technology Portfolio and Profunds Ultrashort Nasdaq 100, you can compare the effects of market volatilities on Global Technology 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 Global Technology with a short position of Profunds Ultrashort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Technology and Profunds Ultrashort.

Diversification Opportunities for Global Technology and Profunds Ultrashort

-0.86

Correlation Coefficient

Global Technology  Profunds Ultrashort

Pay attention - limited upside

The 3 months correlation between Global and Profunds is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio 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 Global Technology 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 Global Technology Portfolio 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 Global Technology i.e., Global Technology and Profunds Ultrashort go up and down completely randomly.

Pair Corralation between Global Technology and Profunds Ultrashort

Assuming the 90 days horizon Global Technology Portfolio is expected to under-perform the Profunds Ultrashort. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Technology Portfolio is 1.78 times less risky than Profunds Ultrashort. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Profunds Ultrashort Nasdaq 100 is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,290  in Profunds Ultrashort Nasdaq 100 on December 4, 2024 and sell it today you would earn a total of  193.00  from holding Profunds Ultrashort Nasdaq 100 or generate 8.43% return on investment over 90 days.

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

Global Technology Portfolio  vs.  Profunds Ultrashort Nasdaq 100

Global Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Technology Portfolio 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.

Profunds Ultrashort

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Ultrashort Nasdaq 100 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Profunds Ultrashort may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Technology and Profunds Ultrashort

The main advantage of trading using opposite Global Technology and Profunds Ultrashort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology 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.

The idea behind Global Technology Portfolio and Profunds Ultrashort Nasdaq 100 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.