Correlation Between Profunds Ultrashort and American Balanced
Can any of the company-specific risk be diversified away by investing in both Profunds Ultrashort and American Balanced 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 American Balanced 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 American Balanced Fund, you can compare the effects of market volatilities on Profunds Ultrashort and American Balanced 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 American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Ultrashort and American Balanced.
Diversification Opportunities for Profunds Ultrashort and American Balanced
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Profunds and American is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced 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 American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and American Balanced go up and down completely randomly.
Pair Corralation between Profunds Ultrashort and American Balanced
Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to under-perform the American Balanced. In addition to that, Profunds Ultrashort is 3.62 times more volatile than American Balanced Fund. It trades about -0.07 of its total potential returns per unit of risk. American Balanced Fund is currently generating about 0.06 per unit of volatility. If you would invest 3,337 in American Balanced Fund on March 13, 2024 and sell it today you would earn a total of 64.00 from holding American Balanced Fund or generate 1.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Profunds Ultrashort Nasdaq 100 vs. American Balanced Fund
Performance |
Timeline |
Profunds Ultrashort |
American Balanced |
Profunds Ultrashort and American Balanced Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Profunds Ultrashort and American Balanced
The main advantage of trading using opposite Profunds Ultrashort and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds Ultrashort position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced's long position.Profunds Ultrashort vs. Federated Prudent Bear | Profunds Ultrashort vs. Federated Prudent Bear | Profunds Ultrashort vs. Grizzly Short Fund |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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