Correlation Between Quantitative Longshort and Profunds Ultrashort

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

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

Diversification Opportunities for Quantitative Longshort and Profunds Ultrashort

-0.77

Correlation Coefficient

Quantitative Longshort  Profunds Ultrashort

Pay attention - limited upside

The 3 months correlation between Quantitative and Profunds is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity and Profunds Ultrashort Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profunds Ultrashort and Quantitative Longshort 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 Quantitative Longshort Equity are associated (or correlated) with Profunds Ultrashort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profunds Ultrashort has no effect on the direction of Quantitative Longshort i.e., Quantitative Longshort and Profunds Ultrashort go up and down completely randomly.

Pair Corralation between Quantitative Longshort and Profunds Ultrashort

Assuming the 90 days horizon Quantitative Longshort Equity is expected to generate 0.21 times more return on investment than Profunds Ultrashort. However, Quantitative Longshort Equity is 4.79 times less risky than Profunds Ultrashort. It trades about 0.15 of its potential returns per unit of risk. Profunds Ultrashort Nasdaq 100 is currently generating about -0.14 per unit of risk. If you would invest  1,410  in Quantitative Longshort Equity on September 3, 2024 and sell it today you would earn a total of  60.00  from holding Quantitative Longshort Equity or generate 4.26% return on investment over 90 days.

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

Quantitative Longshort Equity  vs.  Profunds Ultrashort Nasdaq 100

Quantitative Longshort

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quantitative Longshort Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Quantitative Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Quantitative Longshort and Profunds Ultrashort

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

The idea behind Quantitative Longshort Equity and Profunds Ultrashort Nasdaq 100 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.