Correlation Between Ultrashort Mid-cap and Large-cap Growth

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

By analyzing existing cross correlation between Ultrashort Mid Cap Profund and Large Cap Growth Profund, you can compare the effects of market volatilities on Ultrashort Mid-cap and Large-cap Growth 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 Ultrashort Mid-cap with a short position of Large-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrashort Mid-cap and Large-cap Growth.

Diversification Opportunities for Ultrashort Mid-cap and Large-cap Growth

-0.92

Correlation Coefficient

Ultrashort Mid-cap  Large-cap Growth

Pay attention - limited upside

The 3 months correlation between Ultrashort and Large-cap is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ultrashort Mid Cap Profund and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Ultrashort Mid-cap 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 Ultrashort Mid Cap Profund are associated (or correlated) with Large-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Ultrashort Mid-cap i.e., Ultrashort Mid-cap and Large-cap Growth go up and down completely randomly.

Pair Corralation between Ultrashort Mid-cap and Large-cap Growth

Assuming the 90 days horizon Ultrashort Mid Cap Profund is expected to under-perform the Large-cap Growth. In addition to that, Ultrashort Mid-cap is 1.9 times more volatile than Large Cap Growth Profund. It trades about -0.12 of its total potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.1 per unit of volatility. If you would invest  4,196  in Large Cap Growth Profund on August 30, 2024 and sell it today you would earn a total of  287.00  from holding Large Cap Growth Profund or generate 6.84% return on investment over 90 days.

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

Ultrashort Mid Cap Profund  vs.  Large Cap Growth Profund

Ultrashort Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Mid Cap Profund 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 forward indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

Large Cap Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large-cap Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ultrashort Mid-cap and Large-cap Growth

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

The idea behind Ultrashort Mid Cap Profund and Large Cap Growth Profund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.