Correlation Between Profunds Ultrashort and Forum Funds

Can any of the company-specific risk be diversified away by investing in both Profunds Ultrashort and Forum Funds 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 Forum Funds 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 Forum Funds , you can compare the effects of market volatilities on Profunds Ultrashort and Forum Funds 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 Forum Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Ultrashort and Forum Funds.

Diversification Opportunities for Profunds Ultrashort and Forum Funds

0.05

Correlation Coefficient

Profunds Ultrashort  Forum Funds

Significant diversification

The 3 months correlation between Profunds and Forum is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Forum Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Funds 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 Forum Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Funds has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Forum Funds go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Forum Funds

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to generate 20.77 times more return on investment than Forum Funds. However, Profunds Ultrashort is 20.77 times more volatile than Forum Funds . It trades about 0.11 of its potential returns per unit of risk. Forum Funds is currently generating about 0.16 per unit of risk. If you would invest  2,246  in Profunds Ultrashort Nasdaq 100 on December 22, 2024 and sell it today you would earn a total of  385.00  from holding Profunds Ultrashort Nasdaq 100 or generate 17.14% return on investment over 90 days.

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

Profunds Ultrashort Nasdaq 100  vs.  Forum Funds

Profunds Ultrashort

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Ultrashort Nasdaq 100 are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Profunds Ultrashort showed solid returns over the last few months and may actually be approaching a breakup point.

Forum Funds

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Funds are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Forum Funds 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 Forum Funds

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

The idea behind Profunds Ultrashort Nasdaq 100 and Forum Funds 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.