Correlation Between Absolute Convertible and Small-cap Profund

Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Small-cap Profund 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 Absolute Convertible and Small-cap Profund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Absolute Convertible Arbitrage and Small Cap Profund Small Cap, you can compare the effects of market volatilities on Absolute Convertible and Small-cap Profund 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 Absolute Convertible with a short position of Small-cap Profund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Small-cap Profund.

Diversification Opportunities for Absolute Convertible and Small-cap Profund

0.9

Correlation Coefficient

Absolute Convertible  Small-cap Profund

Almost no diversification

The 3 months correlation between Absolute and Small-cap is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Small Cap Profund Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Profund and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Small-cap Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Profund has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Small-cap Profund go up and down completely randomly.

Pair Corralation between Absolute Convertible and Small-cap Profund

Assuming the 90 days horizon Absolute Convertible is expected to generate 7.03 times less return on investment than Small-cap Profund. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 16.53 times less risky than Small-cap Profund. It trades about 0.41 of its potential returns per unit of risk. Small Cap Profund Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  10,310  in Small Cap Profund Small Cap on May 21, 2025 and sell it today you would earn a total of  1,224  from holding Small Cap Profund Small Cap or generate 11.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Absolute Convertible Arbitrage  vs.  Small Cap Profund Small Cap

Absolute Convertible

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Convertible Arbitrage are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Profund

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Profund Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Small-cap Profund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Absolute Convertible and Small-cap Profund

The main advantage of trading using opposite Absolute Convertible and Small-cap Profund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Small-cap Profund 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 Small-cap Profund will offset losses from the drop in Small-cap Profund's long position.

The idea behind Absolute Convertible Arbitrage and Small Cap Profund Small Cap 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.