Correlation Between Profunds-large Cap and Ultrashort Mid-cap

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

Diversification Opportunities for Profunds-large Cap and Ultrashort Mid-cap

-0.92

Correlation Coefficient

Profunds-large Cap  Ultrashort Mid-cap

Pay attention - limited upside

The 3 months correlation between Profunds-large and Ultrashort is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Ultrashort Mid Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Mid Cap 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 Ultrashort Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Mid Cap has no effect on the direction of Profunds-large Cap i.e., Profunds-large Cap and Ultrashort Mid-cap go up and down completely randomly.

Pair Corralation between Profunds-large Cap and Ultrashort Mid-cap

Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 0.52 times more return on investment than Ultrashort Mid-cap. However, Profunds Large Cap Growth is 1.92 times less risky than Ultrashort Mid-cap. It trades about 0.17 of its potential returns per unit of risk. Ultrashort Mid Cap Profund is currently generating about -0.17 per unit of risk. If you would invest  3,151  in Profunds Large Cap Growth on September 3, 2024 and sell it today you would earn a total of  346.00  from holding Profunds Large Cap Growth or generate 10.98% return on investment over 90 days.

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

Profunds Large Cap Growth  vs.  Ultrashort Mid Cap Profund

Profunds Large Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Large Cap Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Profunds-large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ultrashort Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Mid Cap Profund 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 forward indicators remain fairly strong which may send shares a bit higher in January 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 Ultrashort Mid-cap

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

The idea behind Profunds Large Cap Growth and Ultrashort Mid Cap 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.