Correlation Between Profunds Ultrashort and Destinations Low

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

By analyzing existing cross correlation between Profunds Ultrashort Nasdaq 100 and Destinations Low Duration, you can compare the effects of market volatilities on Profunds Ultrashort and Destinations Low 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 Profunds Ultrashort with a short position of Destinations Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Ultrashort and Destinations Low.

Diversification Opportunities for Profunds Ultrashort and Destinations Low

0.39

Correlation Coefficient

Profunds Ultrashort  Destinations Low

Weak diversification

The 3 months correlation between Profunds and Destinations is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Destinations Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Low Duration and Profunds Ultrashort 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 Profunds Ultrashort Nasdaq 100 are associated (or correlated) with Destinations Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Low Duration has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Destinations Low go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Destinations Low

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to generate 12.14 times more return on investment than Destinations Low. However, Profunds Ultrashort is 12.14 times more volatile than Destinations Low Duration. It trades about 0.0 of its potential returns per unit of risk. Destinations Low Duration is currently generating about -0.14 per unit of risk. If you would invest  2,557  in Profunds Ultrashort Nasdaq 100 on October 5, 2024 and sell it today you would lose (22.00) from holding Profunds Ultrashort Nasdaq 100 or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Profunds Ultrashort Nasdaq 100  vs.  Destinations Low Duration

Profunds Ultrashort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Profunds Ultrashort Nasdaq 100 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 forward 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.

Destinations Low Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations Low Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Destinations Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Profunds Ultrashort and Destinations Low

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

The idea behind Profunds Ultrashort Nasdaq 100 and Destinations Low Duration 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.