Correlation Between Profunds-large Cap and Causeway International

Can any of the company-specific risk be diversified away by investing in both Profunds-large Cap and Causeway International 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 Causeway International 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 Causeway International Small, you can compare the effects of market volatilities on Profunds-large Cap and Causeway International 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 Causeway International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds-large Cap and Causeway International.

Diversification Opportunities for Profunds-large Cap and Causeway International

-0.47

Correlation Coefficient

Profunds-large Cap  Causeway International

Very good diversification

The 3 months correlation between Profunds-large and Causeway is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Causeway International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway International 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 Causeway International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway International has no effect on the direction of Profunds-large Cap i.e., Profunds-large Cap and Causeway International go up and down completely randomly.

Pair Corralation between Profunds-large Cap and Causeway International

Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 0.75 times more return on investment than Causeway International. However, Profunds Large Cap Growth is 1.32 times less risky than Causeway International. It trades about 0.09 of its potential returns per unit of risk. Causeway International Small is currently generating about -0.15 per unit of risk. If you would invest  3,367  in Profunds Large Cap Growth on October 10, 2024 and sell it today you would earn a total of  188.00  from holding Profunds Large Cap Growth or generate 5.58% 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.  Causeway International Small

Profunds Large Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Large Cap Growth are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Profunds-large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Causeway International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Causeway International Small 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Profunds-large Cap and Causeway International

The main advantage of trading using opposite Profunds-large Cap and Causeway International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds-large Cap position performs unexpectedly, Causeway International 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 Causeway International will offset losses from the drop in Causeway International's long position.

The idea behind Profunds Large Cap Growth and Causeway International Small 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.