Correlation Between Target Retirement and Ultrashort Mid-cap

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

By analyzing existing cross correlation between Target Retirement 2040 and Ultrashort Mid Cap Profund, you can compare the effects of market volatilities on Target Retirement and Ultrashort Mid-cap 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 Target Retirement with a short position of Ultrashort Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Ultrashort Mid-cap.

Diversification Opportunities for Target Retirement and Ultrashort Mid-cap

-0.78

Correlation Coefficient

Target Retirement  Ultrashort Mid-cap

Pay attention - limited upside

The 3 months correlation between Target and Ultrashort is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and Ultrashort Mid Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Mid Cap and Target Retirement 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 Target Retirement 2040 are associated (or correlated) with Ultrashort Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Mid Cap has no effect on the direction of Target Retirement i.e., Target Retirement and Ultrashort Mid-cap go up and down completely randomly.

Pair Corralation between Target Retirement and Ultrashort Mid-cap

Assuming the 90 days horizon Target Retirement 2040 is expected to generate 0.25 times more return on investment than Ultrashort Mid-cap. However, Target Retirement 2040 is 4.05 times less risky than Ultrashort Mid-cap. It trades about 0.21 of its potential returns per unit of risk. Ultrashort Mid Cap Profund is currently generating about -0.08 per unit of risk. If you would invest  1,324  in Target Retirement 2040 on August 5, 2025 and sell it today you would earn a total of  175.00  from holding Target Retirement 2040 or generate 13.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Target Retirement 2040  vs.  Ultrashort Mid Cap Profund

Target Retirement 2040

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target Retirement 2040 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Target Retirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultrashort Mid Cap

Risk-Adjusted Performance

Weakest

Over the last 90 days Ultrashort Mid Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ultrashort Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Target Retirement and Ultrashort Mid-cap

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

The idea behind Target Retirement 2040 and Ultrashort Mid Cap Profund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.