Correlation Between Profunds Ultrashort and Pax Balanced
Can any of the company-specific risk be diversified away by investing in both Profunds Ultrashort and Pax Balanced 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 Pax Balanced 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 Pax Balanced Fund, you can compare the effects of market volatilities on Profunds Ultrashort and Pax Balanced 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 Pax Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Ultrashort and Pax Balanced.
Diversification Opportunities for Profunds Ultrashort and Pax Balanced
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Profunds and Pax is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced 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 Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Pax Balanced go up and down completely randomly.
Pair Corralation between Profunds Ultrashort and Pax Balanced
Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to generate 4.07 times more return on investment than Pax Balanced. However, Profunds Ultrashort is 4.07 times more volatile than Pax Balanced Fund. It trades about 0.03 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about -0.09 per unit of risk. If you would invest 2,325 in Profunds Ultrashort Nasdaq 100 on December 2, 2024 and sell it today you would earn a total of 52.00 from holding Profunds Ultrashort Nasdaq 100 or generate 2.24% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Profunds Ultrashort Nasdaq 100 vs. Pax Balanced Fund
Performance |
Timeline |
Profunds Ultrashort |
Pax Balanced |
Profunds Ultrashort and Pax Balanced Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Profunds Ultrashort and Pax Balanced
The main advantage of trading using opposite Profunds Ultrashort and Pax Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds Ultrashort position performs unexpectedly, Pax Balanced 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 Pax Balanced will offset losses from the drop in Pax Balanced's long position.The idea behind Profunds Ultrashort Nasdaq 100 and Pax Balanced Fund 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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Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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