Correlation Between Industrials Portfolio and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both Industrials Portfolio and Nasdaq-100(r) 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 Industrials Portfolio and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrials Portfolio Industrials and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Industrials Portfolio and Nasdaq-100(r) 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 Industrials Portfolio with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrials Portfolio and Nasdaq-100(r).
Diversification Opportunities for Industrials Portfolio and Nasdaq-100(r)
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Industrials and Nasdaq-100(r) is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Industrials Portfolio Industri and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Industrials Portfolio 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 Industrials Portfolio Industrials are associated (or correlated) with Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Industrials Portfolio i.e., Industrials Portfolio and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between Industrials Portfolio and Nasdaq-100(r)
Assuming the 90 days horizon Industrials Portfolio is expected to generate 1.54 times less return on investment than Nasdaq-100(r). But when comparing it to its historical volatility, Industrials Portfolio Industrials is 2.02 times less risky than Nasdaq-100(r). It trades about 0.11 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 31,824 in Nasdaq 100 2x Strategy on August 31, 2024 and sell it today you would earn a total of 25,226 from holding Nasdaq 100 2x Strategy or generate 79.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrials Portfolio Industri vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| Industrials Portfolio |
| Nasdaq 100 2x |
Industrials Portfolio and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrials Portfolio and Nasdaq-100(r)
The main advantage of trading using opposite Industrials Portfolio and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrials Portfolio position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.The idea behind Industrials Portfolio Industrials and Nasdaq 100 2x Strategy 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.
| Nasdaq-100(r) vs. Sp 500 2x | Nasdaq-100(r) vs. Inverse Nasdaq 100 2x | Nasdaq-100(r) vs. Inverse Sp 500 | Nasdaq-100(r) vs. Ultra Nasdaq 100 Profunds |
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 CEOs Directory module to screen CEOs from public companies around the world.
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