Correlation Between World Energy and Inverse Nasdaq
Can any of the company-specific risk be diversified away by investing in both World Energy and Inverse Nasdaq 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 World Energy and Inverse Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on World Energy and Inverse Nasdaq 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 World Energy with a short position of Inverse Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Inverse Nasdaq.
Diversification Opportunities for World Energy and Inverse Nasdaq
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between World and Inverse is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund 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 World Energy 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 World Energy Fund are associated (or correlated) with Inverse Nasdaq. 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 World Energy i.e., World Energy and Inverse Nasdaq go up and down completely randomly.
Pair Corralation between World Energy and Inverse Nasdaq
Assuming the 90 days horizon World Energy is expected to generate 2.97 times less return on investment than Inverse Nasdaq. But when comparing it to its historical volatility, World Energy Fund is 1.14 times less risky than Inverse Nasdaq. It trades about 0.07 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,042 in Inverse Nasdaq 100 Strategy on October 14, 2024 and sell it today you would earn a total of 49.00 from holding Inverse Nasdaq 100 Strategy or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| World Energy |
| Inverse Nasdaq 100 |
World Energy and Inverse Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Inverse Nasdaq
The main advantage of trading using opposite World Energy and Inverse Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Inverse Nasdaq 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 will offset losses from the drop in Inverse Nasdaq's long position.| World Energy vs. Janus Global Technology | World Energy vs. Biotechnology Fund Class | World Energy vs. Science Technology Fund | World Energy vs. Hennessy Technology Fund |
| Inverse Nasdaq vs. Thrivent Natural Resources | Inverse Nasdaq vs. World Energy Fund | Inverse Nasdaq vs. Transamerica Mlp Energy | Inverse Nasdaq vs. Alpsalerian Energy Infrastructure |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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