Correlation Between Equity Growth and Profunds-large Cap
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Profunds-large Cap 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 Equity Growth and Profunds-large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Equity Growth and Profunds Large Cap Growth, you can compare the effects of market volatilities on Equity Growth and Profunds-large Cap 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 Equity Growth with a short position of Profunds-large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Profunds-large Cap.
Diversification Opportunities for Equity Growth and Profunds-large Cap
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Profunds-large is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Equity Growth and Profunds Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profunds Large Cap and Equity Growth 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 The Equity Growth are associated (or correlated) with Profunds-large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profunds Large Cap has no effect on the direction of Equity Growth i.e., Equity Growth and Profunds-large Cap go up and down completely randomly.
Pair Corralation between Equity Growth and Profunds-large Cap
Assuming the 90 days horizon The Equity Growth is expected to generate 1.34 times more return on investment than Profunds-large Cap. However, Equity Growth is 1.34 times more volatile than Profunds Large Cap Growth. It trades about 0.13 of its potential returns per unit of risk. Profunds Large Cap Growth is currently generating about 0.05 per unit of risk. If you would invest 2,618 in The Equity Growth on November 7, 2024 and sell it today you would earn a total of 312.00 from holding The Equity Growth or generate 11.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Equity Growth vs. Profunds Large Cap Growth
Performance |
| Timeline |
| Equity Growth |
| Profunds Large Cap |
Equity Growth and Profunds-large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Profunds-large Cap
The main advantage of trading using opposite Equity Growth and Profunds-large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Profunds-large Cap 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-large Cap will offset losses from the drop in Profunds-large Cap's long position.| Equity Growth vs. The International Smaller | Equity Growth vs. The International Smaller | Equity Growth vs. The International Equity | Equity Growth vs. The Eafe Pure |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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