Correlation Between Profunds Large and Fundamental Large

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

Diversification Opportunities for Profunds Large and Fundamental Large

-0.06

Correlation Coefficient

Profunds Large  Fundamental Large

Good diversification

The 3 months correlation between Profunds and Fundamental is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap 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 Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Profunds Large i.e., Profunds Large and Fundamental Large go up and down completely randomly.

Pair Corralation between Profunds Large and Fundamental Large

Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 0.71 times more return on investment than Fundamental Large. However, Profunds Large Cap Growth is 1.41 times less risky than Fundamental Large. It trades about 0.12 of its potential returns per unit of risk. Fundamental Large Cap is currently generating about -0.06 per unit of risk. If you would invest  3,376  in Profunds Large Cap Growth on October 24, 2024 and sell it today you would earn a total of  255.00  from holding Profunds Large Cap Growth or generate 7.55% return on investment over 90 days.

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

Profunds Large Cap Growth  vs.  Fundamental Large Cap

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.

Fundamental Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Profunds Large Cap Growth and Fundamental Large Cap 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.