Correlation Between Dow Jones and Ultra Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Ultra 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 Dow Jones and Ultra Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Ultra Nasdaq 100 Profunds, you can compare the effects of market volatilities on Dow Jones and Ultra 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 Dow Jones with a short position of Ultra Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Ultra Nasdaq-100.
Diversification Opportunities for Dow Jones and Ultra Nasdaq-100
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Ultra is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Ultra Nasdaq 100 Profunds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Nasdaq 100 and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Ultra 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 Ultra Nasdaq 100 has no effect on the direction of Dow Jones i.e., Dow Jones and Ultra Nasdaq-100 go up and down completely randomly.
Pair Corralation between Dow Jones and Ultra Nasdaq-100
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.99 times less return on investment than Ultra Nasdaq-100. But when comparing it to its historical volatility, Dow Jones Industrial is 2.37 times less risky than Ultra Nasdaq-100. It trades about 0.15 of its potential returns per unit of risk. Ultra Nasdaq 100 Profunds is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 10,626 in Ultra Nasdaq 100 Profunds on August 24, 2024 and sell it today you would earn a total of 645.00 from holding Ultra Nasdaq 100 Profunds or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Ultra Nasdaq 100 Profunds
Performance |
| Timeline |
Dow Jones and Ultra Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Ultra Nasdaq 100 Profunds
Pair trading matchups for Ultra Nasdaq-100
Pair Trading with Dow Jones and Ultra Nasdaq-100
The main advantage of trading using opposite Dow Jones and Ultra Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Ultra 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 Ultra Nasdaq-100 will offset losses from the drop in Ultra Nasdaq-100's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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