Correlation Between Profunds-large Cap and Smallcap Growth

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

Diversification Opportunities for Profunds-large Cap and Smallcap Growth

0.14

Correlation Coefficient

Profunds-large Cap  Smallcap Growth

Average diversification

The 3 months correlation between Profunds-large and Smallcap is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap 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 Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of Profunds-large Cap i.e., Profunds-large Cap and Smallcap Growth go up and down completely randomly.

Pair Corralation between Profunds-large Cap and Smallcap Growth

Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 0.87 times more return on investment than Smallcap Growth. However, Profunds Large Cap Growth is 1.15 times less risky than Smallcap Growth. It trades about 0.11 of its potential returns per unit of risk. Smallcap Growth Fund is currently generating about 0.04 per unit of risk. If you would invest  2,678  in Profunds Large Cap Growth on October 9, 2024 and sell it today you would earn a total of  870.00  from holding Profunds Large Cap Growth or generate 32.49% return on investment over 90 days.

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

Profunds Large Cap Growth  vs.  Smallcap Growth Fund

Profunds Large Cap

Risk-Adjusted Performance

6 of 100

OK

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.

Smallcap Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smallcap Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Smallcap Growth 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 Cap and Smallcap Growth

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

The idea behind Profunds Large Cap Growth and Smallcap Growth Fund 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..