Correlation Between Profunds Large and Short Oil
Can any of the company-specific risk be diversified away by investing in both Profunds Large and Short Oil 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 and Short Oil 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 Short Oil Gas, you can compare the effects of market volatilities on Profunds Large and Short Oil 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 with a short position of Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Large and Short Oil.
Diversification Opportunities for Profunds Large and Short Oil
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Profunds and Short is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas and Profunds Large 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Profunds Large i.e., Profunds Large and Short Oil go up and down completely randomly.
Pair Corralation between Profunds Large and Short Oil
Assuming the 90 days horizon Profunds Large Cap Growth is expected to generate 0.83 times more return on investment than Short Oil. However, Profunds Large Cap Growth is 1.21 times less risky than Short Oil. It trades about 0.09 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.14 per unit of risk. If you would invest 3,338 in Profunds Large Cap Growth on August 31, 2024 and sell it today you would earn a total of 129.00 from holding Profunds Large Cap Growth or generate 3.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Profunds Large Cap Growth vs. Short Oil Gas
Performance |
| Timeline |
| Profunds Large Cap |
| Short Oil Gas |
Profunds Large and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Profunds Large and Short Oil
The main advantage of trading using opposite Profunds Large and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds Large position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil's long position.| Profunds Large vs. Absolute Convertible Arbitrage | Profunds Large vs. Putnam Convertible Incm Gwth | Profunds Large vs. Gabelli Convertible And | Profunds Large vs. Rationalpier 88 Convertible |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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