Correlation Between Ultrashort Mid and Profunds Ultrashort

Can any of the company-specific risk be diversified away by investing in both Ultrashort Mid 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 Ultrashort Mid and Profunds Ultrashort 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 Profunds Ultrashort Nasdaq 100, you can compare the effects of market volatilities on Ultrashort Mid 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 Ultrashort Mid with a short position of Profunds Ultrashort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrashort Mid and Profunds Ultrashort.

Diversification Opportunities for Ultrashort Mid and Profunds Ultrashort

0.92

Correlation Coefficient

Ultrashort Mid  Profunds Ultrashort

Almost no diversification

The 3 months correlation between Ultrashort and Profunds is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ultrashort Mid Cap Profund 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 Ultrashort Mid 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 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 Ultrashort Mid i.e., Ultrashort Mid and Profunds Ultrashort go up and down completely randomly.

Pair Corralation between Ultrashort Mid and Profunds Ultrashort

Assuming the 90 days horizon Ultrashort Mid Cap Profund is expected to under-perform the Profunds Ultrashort. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ultrashort Mid Cap Profund is 1.11 times less risky than Profunds Ultrashort. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Profunds Ultrashort Nasdaq 100 is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  3,271  in Profunds Ultrashort Nasdaq 100 on September 5, 2024 and sell it today you would lose (651.00) from holding Profunds Ultrashort Nasdaq 100 or give up 19.9% of portfolio value over 90 days.

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

Ultrashort Mid Cap Profund  vs.  Profunds Ultrashort Nasdaq 100

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 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.

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 forward 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 Ultrashort Mid and Profunds Ultrashort

The main advantage of trading using opposite Ultrashort Mid and Profunds Ultrashort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultrashort Mid 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 Ultrashort Mid Cap Profund 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.