Correlation Between ACE 24 and ACE NASDAQ100
Can any of the company-specific risk be diversified away by investing in both ACE 24 and ACE NASDAQ100 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 ACE 24 and ACE NASDAQ100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ACE 24 12 Term and ACE NASDAQ100 3070, you can compare the effects of market volatilities on ACE 24 and ACE NASDAQ100 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 ACE 24 with a short position of ACE NASDAQ100. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACE 24 and ACE NASDAQ100.
Diversification Opportunities for ACE 24 and ACE NASDAQ100
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ACE and ACE is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ACE 24 12 Term and ACE NASDAQ100 3070 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACE NASDAQ100 3070 and ACE 24 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 ACE 24 12 Term are associated (or correlated) with ACE NASDAQ100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACE NASDAQ100 3070 has no effect on the direction of ACE 24 i.e., ACE 24 and ACE NASDAQ100 go up and down completely randomly.
Pair Corralation between ACE 24 and ACE NASDAQ100
Assuming the 90 days trading horizon ACE 24 is expected to generate 18.84 times less return on investment than ACE NASDAQ100. But when comparing it to its historical volatility, ACE 24 12 Term is 72.78 times less risky than ACE NASDAQ100. It trades about 1.35 of its potential returns per unit of risk. ACE NASDAQ100 3070 is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,255,000 in ACE NASDAQ100 3070 on September 5, 2024 and sell it today you would earn a total of 63,500 from holding ACE NASDAQ100 3070 or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ACE 24 12 Term vs. ACE NASDAQ100 3070
Performance |
| Timeline |
| ACE 24 12 |
| ACE NASDAQ100 3070 |
ACE 24 and ACE NASDAQ100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ACE 24 and ACE NASDAQ100
The main advantage of trading using opposite ACE 24 and ACE NASDAQ100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACE 24 position performs unexpectedly, ACE NASDAQ100 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 ACE NASDAQ100 will offset losses from the drop in ACE NASDAQ100's long position.The idea behind ACE 24 12 Term and ACE NASDAQ100 3070 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.| ACE NASDAQ100 vs. ACE KRX Physical | ACE NASDAQ100 vs. ACE EV Value | ACE NASDAQ100 vs. ACE NVIDIA30 Blend | ACE NASDAQ100 vs. ACE 24 12 Term |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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