Correlation Between Rising Rates and Profunds Large

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

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

Diversification Opportunities for Rising Rates and Profunds Large

0.65

Correlation Coefficient

Rising Rates  Profunds Large

Poor diversification

The 3 months correlation between Rising and Profunds is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rising Rates Opportunity 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 Rising Rates 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 Rising Rates Opportunity 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 Rising Rates i.e., Rising Rates and Profunds Large go up and down completely randomly.

Pair Corralation between Rising Rates and Profunds Large

Assuming the 90 days horizon Rising Rates is expected to generate 10.56 times less return on investment than Profunds Large. In addition to that, Rising Rates is 1.07 times more volatile than Profunds Large Cap Growth. It trades about 0.01 of its total potential returns per unit of risk. Profunds Large Cap Growth is currently generating about 0.12 per unit of volatility. If you would invest  2,627  in Profunds Large Cap Growth on September 14, 2024 and sell it today you would earn a total of  989.00  from holding Profunds Large Cap Growth or generate 37.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Rising Rates Opportunity  vs.  Profunds Large Cap Growth

Rising Rates Opportunity

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rising Rates Opportunity are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Rising Rates showed solid returns over the last few months and may actually be approaching a breakup point.

Profunds Large Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Large Cap Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Profunds Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rising Rates and Profunds Large

The main advantage of trading using opposite Rising Rates and Profunds Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Rates 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 Rising Rates Opportunity 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.