Correlation Between Profunds Ultrashort and Kensington Defender

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

Diversification Opportunities for Profunds Ultrashort and Kensington Defender

-0.17

Correlation Coefficient

Profunds Ultrashort  Kensington Defender

Good diversification

The 3 months correlation between Profunds and Kensington is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Kensington Defender Institutio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Defender 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 Kensington Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Defender has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Kensington Defender go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Kensington Defender

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to under-perform the Kensington Defender. In addition to that, Profunds Ultrashort is 3.72 times more volatile than Kensington Defender Institutional. It trades about -0.13 of its total potential returns per unit of risk. Kensington Defender Institutional is currently generating about -0.2 per unit of volatility. If you would invest  1,068  in Kensington Defender Institutional on September 24, 2024 and sell it today you would lose (27.00) from holding Kensington Defender Institutional or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Profunds Ultrashort Nasdaq 100  vs.  Kensington Defender Institutio

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Kensington Defender

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kensington Defender Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Kensington Defender is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Profunds Ultrashort and Kensington Defender

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

The idea behind Profunds Ultrashort Nasdaq 100 and Kensington Defender Institutional 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.