Correlation Between Short Nasdaq-100 and Ultrashort Mid-cap

Can any of the company-specific risk be diversified away by investing in both Short Nasdaq-100 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 Short Nasdaq-100 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 Short Nasdaq 100 Profund and Ultrashort Mid Cap Profund, you can compare the effects of market volatilities on Short Nasdaq-100 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 Short Nasdaq-100 with a short position of Ultrashort Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Nasdaq-100 and Ultrashort Mid-cap.

Diversification Opportunities for Short Nasdaq-100 and Ultrashort Mid-cap

0.32

Correlation Coefficient

Short Nasdaq-100  Ultrashort Mid-cap

Weak diversification

The 3 months correlation between Short and Ultrashort is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Short Nasdaq 100 Profund 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 Short Nasdaq-100 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 Short Nasdaq 100 Profund 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 Short Nasdaq-100 i.e., Short Nasdaq-100 and Ultrashort Mid-cap go up and down completely randomly.

Pair Corralation between Short Nasdaq-100 and Ultrashort Mid-cap

Assuming the 90 days horizon Short Nasdaq 100 Profund is expected to under-perform the Ultrashort Mid-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Nasdaq 100 Profund is 1.35 times less risky than Ultrashort Mid-cap. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Ultrashort Mid Cap Profund is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,983  in Ultrashort Mid Cap Profund on October 15, 2024 and sell it today you would lose (102.00) from holding Ultrashort Mid Cap Profund or give up 3.42% of portfolio value over 90 days.

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

Short Nasdaq 100 Profund  vs.  Ultrashort Mid Cap Profund

Short Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Nasdaq 100 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

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 fairly strong forward indicators, Ultrashort Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Nasdaq-100 and Ultrashort Mid-cap

The main advantage of trading using opposite Short Nasdaq-100 and Ultrashort Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Nasdaq-100 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 Short Nasdaq 100 Profund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.