Correlation Between M Large and Profunds-large Cap

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

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

Diversification Opportunities for M Large and Profunds-large Cap

0.84

Correlation Coefficient

M Large  Profunds-large Cap

Very poor diversification

The 3 months correlation between MTCGX and Profunds-large is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding M Large 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 M 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 M Large Cap are associated (or correlated) with Profunds-large Cap. 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 M Large i.e., M Large and Profunds-large Cap go up and down completely randomly.

Pair Corralation between M Large and Profunds-large Cap

Assuming the 90 days horizon M Large Cap is expected to under-perform the Profunds-large Cap. In addition to that, M Large is 1.44 times more volatile than Profunds Large Cap Growth. It trades about -0.13 of its total potential returns per unit of risk. Profunds Large Cap Growth is currently generating about -0.1 per unit of volatility. If you would invest  3,601  in Profunds Large Cap Growth on December 23, 2024 and sell it today you would lose (327.00) from holding Profunds Large Cap Growth or give up 9.08% of portfolio value over 90 days.

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

M Large Cap  vs.  Profunds Large Cap Growth

M Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days M Large Cap 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 M Large and Profunds-large Cap

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

The idea behind M Large 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.