Correlation Between Profunds-large Cap and Us Government
Can any of the company-specific risk be diversified away by investing in both Profunds-large Cap and Us Government 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-large Cap and Us Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Profunds Large Cap Growth and Us Government Plus, you can compare the effects of market volatilities on Profunds-large Cap and Us Government 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-large Cap with a short position of Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds-large Cap and Us Government.
Diversification Opportunities for Profunds-large Cap and Us Government
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Profunds-large and GVPSX is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Us Government Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Plus and Profunds-large Cap 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 Large Cap Growth are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Plus has no effect on the direction of Profunds-large Cap i.e., Profunds-large Cap and Us Government go up and down completely randomly.
Pair Corralation between Profunds-large Cap and Us Government
Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 0.8 times more return on investment than Us Government. However, Profunds Large Cap Growth is 1.24 times less risky than Us Government. It trades about 0.09 of its potential returns per unit of risk. Us Government Plus is currently generating about -0.02 per unit of risk. If you would invest 2,294 in Profunds Large Cap Growth on August 30, 2024 and sell it today you would earn a total of 1,173 from holding Profunds Large Cap Growth or generate 51.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Profunds Large Cap Growth vs. Us Government Plus
Performance |
| Timeline |
| Profunds Large Cap |
| Us Government Plus |
Profunds-large Cap and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Profunds-large Cap and Us Government
The main advantage of trading using opposite Profunds-large Cap and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds-large Cap position performs unexpectedly, Us Government 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 Us Government will offset losses from the drop in Us Government's long position.The idea behind Profunds Large Cap Growth and Us Government Plus 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.
| Us Government vs. Short Real Estate | Us Government vs. Real Estate Ultrasector | Us Government vs. Real Estate Ultrasector | Us Government vs. Short Real Estate |
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.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |