Correlation Between Profunds Ultrashort and Princeton Premium

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

Diversification Opportunities for Profunds Ultrashort and Princeton Premium

-0.64

Correlation Coefficient

Profunds Ultrashort  Princeton Premium

Excellent diversification

The 3 months correlation between Profunds and Princeton is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and Princeton Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Premium 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 Princeton Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Premium has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and Princeton Premium go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and Princeton Premium

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to under-perform the Princeton Premium. In addition to that, Profunds Ultrashort is 4.24 times more volatile than Princeton Premium. It trades about -0.43 of its total potential returns per unit of risk. Princeton Premium is currently generating about -0.15 per unit of volatility. If you would invest  1,205  in Princeton Premium on September 16, 2024 and sell it today you would lose (13.00) from holding Princeton Premium or give up 1.08% 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.  Princeton Premium

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 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.

Princeton Premium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Premium are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Princeton Premium 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 Princeton Premium

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

The idea behind Profunds Ultrashort Nasdaq 100 and Princeton Premium 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.