Correlation Between Small-cap Profund and Ultrasmall-cap Profund

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

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

Diversification Opportunities for Small-cap Profund and Ultrasmall-cap Profund

1.0

Correlation Coefficient

Small-cap Profund  Ultrasmall-cap Profund

No risk reduction

The 3 months correlation between Small-cap and Ultrasmall-cap is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Profund Small Cap and Ultrasmall Cap Profund Ultrasm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrasmall Cap Profund and Small-cap Profund 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 Small Cap Profund Small Cap are associated (or correlated) with Ultrasmall-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 Ultrasmall Cap Profund has no effect on the direction of Small-cap Profund i.e., Small-cap Profund and Ultrasmall-cap Profund go up and down completely randomly.

Pair Corralation between Small-cap Profund and Ultrasmall-cap Profund

Assuming the 90 days horizon Small-cap Profund is expected to generate 1.95 times less return on investment than Ultrasmall-cap Profund. But when comparing it to its historical volatility, Small Cap Profund Small Cap is 2.01 times less risky than Ultrasmall-cap Profund. It trades about 0.16 of its potential returns per unit of risk. Ultrasmall Cap Profund Ultrasmall Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,351  in Ultrasmall Cap Profund Ultrasmall Cap on May 22, 2025 and sell it today you would earn a total of  1,165  from holding Ultrasmall Cap Profund Ultrasmall Cap or generate 21.77% return on investment over 90 days.

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

Small Cap Profund Small Cap  vs.  Ultrasmall Cap Profund Ultrasm

Small Cap Profund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Profund Small Cap are ranked lower than 12 (%) 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.

Ultrasmall Cap Profund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrasmall Cap Profund Ultrasmall Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultrasmall-cap Profund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small-cap Profund and Ultrasmall-cap Profund

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

The idea behind Small Cap Profund Small Cap and Ultrasmall Cap Profund Ultrasmall 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.