Correlation Between Ultrasmall Cap and Multifactor Equity

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

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

Diversification Opportunities for Ultrasmall Cap and Multifactor Equity

0.92

Correlation Coefficient

Ultrasmall Cap  Multifactor Equity

Almost no diversification

The 3 months correlation between Ultrasmall and Multifactor is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity and Ultrasmall 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 Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Multifactor Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multifactor Equity has no effect on the direction of Ultrasmall Cap i.e., Ultrasmall Cap and Multifactor Equity go up and down completely randomly.

Pair Corralation between Ultrasmall Cap and Multifactor Equity

Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to generate 3.24 times more return on investment than Multifactor Equity. However, Ultrasmall Cap is 3.24 times more volatile than Multifactor Equity Fund. It trades about 0.09 of its potential returns per unit of risk. Multifactor Equity Fund is currently generating about 0.18 per unit of risk. If you would invest  5,611  in Ultrasmall Cap Profund Ultrasmall Cap on May 11, 2025 and sell it today you would earn a total of  589.00  from holding Ultrasmall Cap Profund Ultrasmall Cap or generate 10.5% return on investment over 90 days.

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

Ultrasmall Cap Profund Ultrasm  vs.  Multifactor Equity Fund

Ultrasmall Cap Profund

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrasmall Cap Profund Ultrasmall Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultrasmall Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Multifactor Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multifactor Equity Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Multifactor Equity may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Ultrasmall Cap and Multifactor Equity

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

The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Multifactor Equity Fund 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.