Correlation Between Applied Finance and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Inverse Nasdaq-100 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 Applied Finance and Inverse Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Applied Finance and Inverse Nasdaq-100 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 Applied Finance with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Inverse Nasdaq-100.
Diversification Opportunities for Applied Finance and Inverse Nasdaq-100
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Applied and Inverse is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Inverse Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Applied Finance i.e., Applied Finance and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Applied Finance and Inverse Nasdaq-100
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 0.92 times more return on investment than Inverse Nasdaq-100. However, Applied Finance Explorer is 1.09 times less risky than Inverse Nasdaq-100. It trades about 0.21 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.1 per unit of risk. If you would invest 2,168 in Applied Finance Explorer on November 8, 2024 and sell it today you would earn a total of 97.00 from holding Applied Finance Explorer or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Applied Finance Explorer vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Applied Finance Explorer |
| Inverse Nasdaq 100 |
Applied Finance and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Inverse Nasdaq-100
The main advantage of trading using opposite Applied Finance and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Inverse Nasdaq-100 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 Inverse Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's long position.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Inverse Nasdaq-100 vs. Nt International Small Mid | Inverse Nasdaq-100 vs. Rbc International Small | Inverse Nasdaq-100 vs. Ab Small Cap | Inverse Nasdaq-100 vs. Sp Smallcap 600 |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |