Correlation Between Large Cap and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both Large Cap and 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 Large Cap and Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap Growth Profund and Nasdaq 100, you can compare the effects of market volatilities on Large Cap and 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 Large Cap with a short position of Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Nasdaq 100.
Diversification Opportunities for Large Cap and Nasdaq 100
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Large and Nasdaq is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 and Large Cap 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 Large Cap Growth Profund are associated (or correlated) with 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 Nasdaq 100 has no effect on the direction of Large Cap i.e., Large Cap and Nasdaq 100 go up and down completely randomly.
Pair Corralation between Large Cap and Nasdaq 100
Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 0.98 times more return on investment than Nasdaq 100. However, Large Cap Growth Profund is 1.02 times less risky than Nasdaq 100. It trades about 0.12 of its potential returns per unit of risk. Nasdaq 100 is currently generating about 0.11 per unit of risk. If you would invest 3,213 in Large Cap Growth Profund on September 1, 2024 and sell it today you would earn a total of 1,270 from holding Large Cap Growth Profund or generate 39.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.42% |
| Values | Daily Returns |
Large Cap Growth Profund vs. Nasdaq 100
Performance |
| Timeline |
| Large Cap Growth |
| Nasdaq 100 |
Large Cap and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Nasdaq 100
The main advantage of trading using opposite Large Cap and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.| Large Cap vs. Short Real Estate | Large Cap vs. Ultrashort Mid Cap Profund | Large Cap vs. Technology Ultrasector Profund | Large Cap vs. Technology Ultrasector Profund |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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