Correlation Between Large Cap and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both Large Cap 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 Large Cap 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 Large Cap Growth Profund and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Large Cap 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 Large Cap with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Nasdaq-100(r).
Diversification Opportunities for Large Cap and Nasdaq-100(r)
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Large and Nasdaq-100(r) is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund 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 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(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 Large Cap i.e., Large Cap and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between Large Cap and Nasdaq-100(r)
Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 0.43 times more return on investment than Nasdaq-100(r). However, Large Cap Growth Profund is 2.33 times less risky than Nasdaq-100(r). It trades about 0.07 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about -0.03 per unit of risk. If you would invest 4,395 in Large Cap Growth Profund on October 14, 2024 and sell it today you would earn a total of 207.00 from holding Large Cap Growth Profund or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Growth Profund vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| Large Cap Growth |
| Nasdaq 100 2x |
Large Cap and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Nasdaq-100(r)
The main advantage of trading using opposite Large Cap and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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.| Large Cap vs. Fmasx | Large Cap vs. Victory Rs Partners | Large Cap vs. Arrow Managed Futures | Large Cap vs. Pabrai Wagons Institutional |
| Nasdaq-100(r) vs. Wells Fargo Diversified | Nasdaq-100(r) vs. Aqr Diversified Arbitrage | Nasdaq-100(r) vs. Fulcrum Diversified Absolute | Nasdaq-100(r) vs. Tax Managed Mid Small |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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