Correlation Between Profunds Ultrashort and Plumb Balanced

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

Diversification Opportunities for Profunds Ultrashort and Plumb Balanced

-0.73

Correlation Coefficient

Profunds Ultrashort  Plumb Balanced

Pay attention - limited upside

The 3 months correlation between Profunds and Plumb is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Plumb Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Balanced 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 Plumb Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Balanced has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Plumb Balanced go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Plumb Balanced

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to under-perform the Plumb Balanced. In addition to that, Profunds Ultrashort is 1.15 times more volatile than Plumb Balanced Fund. It trades about -0.17 of its total potential returns per unit of risk. Plumb Balanced Fund is currently generating about -0.07 per unit of volatility. If you would invest  3,902  in Plumb Balanced Fund on September 14, 2024 and sell it today you would lose (329.00) from holding Plumb Balanced Fund or give up 8.43% of portfolio value over 90 days.

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

Profunds Ultrashort Nasdaq 100  vs.  Plumb Balanced Fund

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.

Plumb Balanced

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Plumb Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Profunds Ultrashort and Plumb Balanced

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

The idea behind Profunds Ultrashort Nasdaq 100 and Plumb Balanced Fund 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.