Correlation Between Fundamental Large and Profunds Large

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

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

Diversification Opportunities for Fundamental Large and Profunds Large

-0.06

Correlation Coefficient

Fundamental Large  Profunds Large

Good diversification

The 3 months correlation between Fundamental and Profunds is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental 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 Fundamental 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 Fundamental Large 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 Fundamental Large i.e., Fundamental Large and Profunds Large go up and down completely randomly.

Pair Corralation between Fundamental Large and Profunds Large

Assuming the 90 days horizon Fundamental Large Cap is expected to under-perform the Profunds Large. In addition to that, Fundamental Large is 1.42 times more volatile than Profunds Large Cap Growth. It trades about -0.06 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  3,355  in Profunds Large Cap Growth on October 23, 2024 and sell it today you would earn a total of  276.00  from holding Profunds Large Cap Growth or generate 8.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Fundamental Large Cap  vs.  Profunds Large Cap Growth

Fundamental Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundamental Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fundamental Large 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Large Cap Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly conflicting basic indicators, Profunds Large may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fundamental Large and Profunds Large

The main advantage of trading using opposite Fundamental Large and Profunds Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large 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 Fundamental 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.