Correlation Between Profunds Ultrashort and Kennedy Capital

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

Diversification Opportunities for Profunds Ultrashort and Kennedy Capital

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Profunds and Kennedy is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Kennedy Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennedy Capital Small 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 Kennedy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennedy Capital Small has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Kennedy Capital go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Kennedy Capital

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to under-perform the Kennedy Capital. In addition to that, Profunds Ultrashort is 1.43 times more volatile than Kennedy Capital Small. It trades about -0.08 of its total potential returns per unit of risk. Kennedy Capital Small is currently generating about -0.03 per unit of volatility. If you would invest  1,258  in Kennedy Capital Small on September 22, 2024 and sell it today you would lose (48.00) from holding Kennedy Capital Small or give up 3.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Profunds Ultrashort Nasdaq 100  vs.  Kennedy Capital Small

 Performance 
       Timeline  
Profunds Ultrashort 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Kennedy Capital Small 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kennedy Capital Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Kennedy Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Profunds Ultrashort and Kennedy Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Profunds Ultrashort and Kennedy Capital

The main advantage of trading using opposite Profunds Ultrashort and Kennedy Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds Ultrashort position performs unexpectedly, Kennedy Capital 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 Kennedy Capital will offset losses from the drop in Kennedy Capital's long position.
The idea behind Profunds Ultrashort Nasdaq 100 and Kennedy Capital Small 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.

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