Correlation Between Mid-cap Profund and Profunds Large

Can any of the company-specific risk be diversified away by investing in both Mid-cap Profund and Profunds 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 Mid-cap Profund and Profunds Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap Profund Mid Cap and Profunds Large Cap Growth, you can compare the effects of market volatilities on Mid-cap Profund and Profunds 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 Mid-cap Profund with a short position of Profunds Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Profund and Profunds Large.

Diversification Opportunities for Mid-cap Profund and Profunds Large

0.94

Correlation Coefficient

Mid-cap Profund  Profunds Large

Almost no diversification

The 3 months correlation between Mid-cap and Profunds is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Profund Mid Cap and Profunds Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profunds Large Cap and Mid-cap Profund 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 Mid Cap Profund Mid Cap are associated (or correlated) with Profunds Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profunds Large Cap has no effect on the direction of Mid-cap Profund i.e., Mid-cap Profund and Profunds Large go up and down completely randomly.

Pair Corralation between Mid-cap Profund and Profunds Large

Assuming the 90 days horizon Mid Cap Profund Mid Cap is expected to generate 0.72 times more return on investment than Profunds Large. However, Mid Cap Profund Mid Cap is 1.38 times less risky than Profunds Large. It trades about -0.09 of its potential returns per unit of risk. Profunds Large Cap Growth is currently generating about -0.11 per unit of risk. If you would invest  12,444  in Mid Cap Profund Mid Cap on December 21, 2024 and sell it today you would lose (704.00) from holding Mid Cap Profund Mid Cap or give up 5.66% of portfolio value over 90 days.

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

Mid Cap Profund Mid Cap  vs.  Profunds Large Cap Growth

Mid Cap Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Profund Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mid-cap Profund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Mid-cap Profund and Profunds Large

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

The idea behind Mid Cap Profund Mid Cap and Profunds Large Cap Growth 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.