Correlation Between Profunds Large and Multimanager Lifestyle

Can any of the company-specific risk be diversified away by investing in both Profunds Large and Multimanager Lifestyle 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 and Multimanager Lifestyle 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 Multimanager Lifestyle Moderate, you can compare the effects of market volatilities on Profunds Large and Multimanager Lifestyle 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 with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Large and Multimanager Lifestyle.

Diversification Opportunities for Profunds Large and Multimanager Lifestyle

0.22

Correlation Coefficient

Profunds Large  Multimanager Lifestyle

Modest diversification

The 3 months correlation between Profunds and Multimanager is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Multimanager Lifestyle Moderat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Profunds Large 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Profunds Large i.e., Profunds Large and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Profunds Large and Multimanager Lifestyle

Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 3.0 times more return on investment than Multimanager Lifestyle. However, Profunds Large is 3.0 times more volatile than Multimanager Lifestyle Moderate. It trades about 0.11 of its potential returns per unit of risk. Multimanager Lifestyle Moderate is currently generating about -0.01 per unit of risk. If you would invest  3,326  in Profunds Large Cap Growth on October 24, 2024 and sell it today you would earn a total of  305.00  from holding Profunds Large Cap Growth or generate 9.17% return on investment over 90 days.

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

Profunds Large Cap Growth  vs.  Multimanager Lifestyle Moderat

Profunds Large Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Large Cap Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly conflicting basic indicators, Profunds Large may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Multimanager Lifestyle

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Moderate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Profunds Large and Multimanager Lifestyle

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

The idea behind Profunds Large Cap Growth and Multimanager Lifestyle Moderate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.