Correlation Between Large Cap and Short Nasdaq
Can any of the company-specific risk be diversified away by investing in both Large Cap and Short Nasdaq 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 Short Nasdaq 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 Short Nasdaq 100 Profund, you can compare the effects of market volatilities on Large Cap and Short Nasdaq 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 Short Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Short Nasdaq.
Diversification Opportunities for Large Cap and Short Nasdaq
-0.99 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Large and Short is -0.99. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund 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 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 Short Nasdaq. 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 Large Cap i.e., Large Cap and Short Nasdaq go up and down completely randomly.
Pair Corralation between Large Cap and Short Nasdaq
Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 0.95 times more return on investment than Short Nasdaq. However, Large Cap Growth Profund is 1.05 times less risky than Short Nasdaq. It trades about 0.12 of its potential returns per unit of risk. Short Nasdaq 100 Profund is currently generating about -0.09 per unit of risk. If you would invest 3,177 in Large Cap Growth Profund on September 26, 2024 and sell it today you would earn a total of 1,483 from holding Large Cap Growth Profund or generate 46.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Growth Profund vs. Short Nasdaq 100 Profund
Performance |
| Timeline |
| Large Cap Growth |
| Short Nasdaq 100 |
Large Cap and Short Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Short Nasdaq
The main advantage of trading using opposite Large Cap and Short Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Short Nasdaq 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 will offset losses from the drop in Short Nasdaq's long position.| Large Cap vs. Lgm Risk Managed | Large Cap vs. Franklin High Income | Large Cap vs. Fa 529 Aggressive | Large Cap vs. Ab High Income |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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