Correlation Between Consumer Services and Short Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Consumer Services and Short 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 Consumer Services and Short Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Services Ultrasector and Short Nasdaq 100 Profund, you can compare the effects of market volatilities on Consumer Services and Short 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 Consumer Services with a short position of Short Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Services and Short Nasdaq-100.
Diversification Opportunities for Consumer Services and Short Nasdaq-100
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Consumer and Short is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Services Ultrasector and Short Nasdaq 100 Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Nasdaq 100 and Consumer Services 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 Consumer Services Ultrasector are associated (or correlated) with Short 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 Short Nasdaq 100 has no effect on the direction of Consumer Services i.e., Consumer Services and Short Nasdaq-100 go up and down completely randomly.
Pair Corralation between Consumer Services and Short Nasdaq-100
Assuming the 90 days horizon Consumer Services Ultrasector is expected to generate 1.48 times more return on investment than Short Nasdaq-100. However, Consumer Services is 1.48 times more volatile than Short Nasdaq 100 Profund. It trades about 0.07 of its potential returns per unit of risk. Short Nasdaq 100 Profund is currently generating about -0.1 per unit of risk. If you would invest 3,495 in Consumer Services Ultrasector on October 15, 2024 and sell it today you would earn a total of 2,376 from holding Consumer Services Ultrasector or generate 67.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Services Ultrasector vs. Short Nasdaq 100 Profund
Performance |
| Timeline |
| Consumer Services |
| Short Nasdaq 100 |
Consumer Services and Short Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Services and Short Nasdaq-100
The main advantage of trading using opposite Consumer Services and Short Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Services position performs unexpectedly, Short 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 Short Nasdaq-100 will offset losses from the drop in Short Nasdaq-100's long position.The idea behind Consumer Services Ultrasector and Short Nasdaq 100 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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