Correlation Between Large-cap Growth and Ultrashort Latin

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

By analyzing existing cross correlation between Large Cap Growth Profund and Ultrashort Latin America, you can compare the effects of market volatilities on Large-cap Growth and Ultrashort Latin 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 Large-cap Growth with a short position of Ultrashort Latin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large-cap Growth and Ultrashort Latin.

Diversification Opportunities for Large-cap Growth and Ultrashort Latin

0.32

Correlation Coefficient

Large-cap Growth  Ultrashort Latin

Weak diversification

The 3 months correlation between Large-cap and Ultrashort is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Ultrashort Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Latin America and Large-cap Growth 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 Large Cap Growth Profund are associated (or correlated) with Ultrashort Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Latin America has no effect on the direction of Large-cap Growth i.e., Large-cap Growth and Ultrashort Latin go up and down completely randomly.

Pair Corralation between Large-cap Growth and Ultrashort Latin

Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 0.61 times more return on investment than Ultrashort Latin. However, Large Cap Growth Profund is 1.65 times less risky than Ultrashort Latin. It trades about -0.12 of its potential returns per unit of risk. Ultrashort Latin America is currently generating about -0.16 per unit of risk. If you would invest  4,723  in Large Cap Growth Profund on December 24, 2024 and sell it today you would lose (477.00) from holding Large Cap Growth Profund or give up 10.1% of portfolio value over 90 days.

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

Large Cap Growth Profund  vs.  Ultrashort Latin America

Large Cap Growth

Risk-Adjusted Performance

Very Weak

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

Ultrashort Latin America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultrashort Latin America has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Large-cap Growth and Ultrashort Latin

The main advantage of trading using opposite Large-cap Growth and Ultrashort Latin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large-cap Growth position performs unexpectedly, Ultrashort Latin 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 Ultrashort Latin will offset losses from the drop in Ultrashort Latin's long position.

The idea behind Large Cap Growth Profund and Ultrashort Latin America 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.