Correlation Between Profunds Ultrashort and Ultrabear Profund

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

Diversification Opportunities for Profunds Ultrashort and Ultrabear Profund

0.75

Correlation Coefficient

Profunds Ultrashort  Ultrabear Profund

Poor diversification

The 3 months correlation between Profunds and Ultrabear is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Ultrabear Profund Ultrabear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrabear Profund 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 Ultrabear Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrabear Profund has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Ultrabear Profund go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Ultrabear Profund

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to under-perform the Ultrabear Profund. In addition to that, Profunds Ultrashort is 1.43 times more volatile than Ultrabear Profund Ultrabear. It trades about -0.03 of its total potential returns per unit of risk. Ultrabear Profund Ultrabear is currently generating about -0.05 per unit of volatility. If you would invest  1,116  in Ultrabear Profund Ultrabear on December 4, 2024 and sell it today you would lose (217.00) from holding Ultrabear Profund Ultrabear or give up 19.44% of portfolio value over 90 days.

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

Profunds Ultrashort Nasdaq 100  vs.  Ultrabear Profund Ultrabear

Profunds Ultrashort

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Profunds Ultrashort Nasdaq 100 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Profunds Ultrashort may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ultrabear Profund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrabear Profund Ultrabear are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrabear Profund may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Profunds Ultrashort and Ultrabear Profund

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

The idea behind Profunds Ultrashort Nasdaq 100 and Ultrabear Profund Ultrabear 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.