Correlation Between Profunds-large Cap and Large-cap Growth

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

Diversification Opportunities for Profunds-large Cap and Large-cap Growth

1.0

Correlation Coefficient

Profunds-large Cap  Large-cap Growth

No risk reduction

The 3 months correlation between Profunds-large and Large-cap is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth 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 Large-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Profunds-large Cap i.e., Profunds-large Cap and Large-cap Growth go up and down completely randomly.

Pair Corralation between Profunds-large Cap and Large-cap Growth

Assuming the 90 days horizon Profunds Large Cap Growth is expected to under-perform the Large-cap Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Profunds Large Cap Growth is 1.0 times less risky than Large-cap Growth. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Large Cap Growth Profund is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  4,594  in Large Cap Growth Profund on December 30, 2024 and sell it today you would lose (456.00) from holding Large Cap Growth Profund or give up 9.93% of portfolio value over 90 days.

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

Profunds Large Cap Growth  vs.  Large Cap Growth Profund

Profunds Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Profunds Large Cap Growth 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.

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.

Pair Trading with Profunds-large Cap and Large-cap Growth

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

The idea behind Profunds Large Cap Growth and Large Cap Growth Profund 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.