Correlation Between Profunds Ultrashort and Palmer Square

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

Diversification Opportunities for Profunds Ultrashort and Palmer Square

0.38

Correlation Coefficient

Profunds Ultrashort  Palmer Square

Weak diversification

The 3 months correlation between Profunds and Palmer is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Palmer Square Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Income 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 Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Income has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Palmer Square go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Palmer Square

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to generate 17.47 times more return on investment than Palmer Square. However, Profunds Ultrashort is 17.47 times more volatile than Palmer Square Income. It trades about 0.12 of its potential returns per unit of risk. Palmer Square Income is currently generating about 0.0 per unit of risk. If you would invest  2,309  in Profunds Ultrashort Nasdaq 100 on December 29, 2024 and sell it today you would earn a total of  446.00  from holding Profunds Ultrashort Nasdaq 100 or generate 19.32% return on investment over 90 days.

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

Profunds Ultrashort Nasdaq 100  vs.  Palmer Square Income

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 9 (%) 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.

Palmer Square Income

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Profunds Ultrashort Nasdaq 100 and Palmer Square Income 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.