Correlation Between Profunds-large Cap and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Profunds-large Cap and Basic Materials 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 Profunds-large Cap and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Profunds Large Cap Growth and Basic Materials Ultrasector, you can compare the effects of market volatilities on Profunds-large Cap and Basic Materials 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 Profunds-large Cap with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds-large Cap and Basic Materials.
Diversification Opportunities for Profunds-large Cap and Basic Materials
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Profunds-large and Basic is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Basic Materials Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials Ultr and Profunds-large Cap 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 Profunds Large Cap Growth are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials Ultr has no effect on the direction of Profunds-large Cap i.e., Profunds-large Cap and Basic Materials go up and down completely randomly.
Pair Corralation between Profunds-large Cap and Basic Materials
Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 0.89 times more return on investment than Basic Materials. However, Profunds Large Cap Growth is 1.12 times less risky than Basic Materials. It trades about 0.09 of its potential returns per unit of risk. Basic Materials Ultrasector is currently generating about -0.29 per unit of risk. If you would invest 3,365 in Profunds Large Cap Growth on October 15, 2024 and sell it today you would earn a total of 190.00 from holding Profunds Large Cap Growth or generate 5.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Profunds Large Cap Growth vs. Basic Materials Ultrasector
Performance |
Timeline |
Profunds Large Cap |
Basic Materials Ultr |
Profunds-large Cap and Basic Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Profunds-large Cap and Basic Materials
The main advantage of trading using opposite Profunds-large Cap and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds-large Cap position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.Profunds-large Cap vs. Ab High Income | ||
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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