Correlation Between Small Cap and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Small Cap and Inverse 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 Small Cap and Inverse Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Series and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Small Cap and Inverse 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 Small Cap with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Inverse Nasdaq-100.
Diversification Opportunities for Small Cap and Inverse Nasdaq-100
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Small and Inverse is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Small 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 Small Cap Value Series are associated (or correlated) with Inverse 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 Inverse Nasdaq 100 has no effect on the direction of Small Cap i.e., Small Cap and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Small Cap and Inverse Nasdaq-100
Assuming the 90 days horizon Small Cap Value Series is expected to generate 0.99 times more return on investment than Inverse Nasdaq-100. However, Small Cap Value Series is 1.01 times less risky than Inverse Nasdaq-100. It trades about 0.1 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.06 per unit of risk. If you would invest 1,368 in Small Cap Value Series on August 24, 2024 and sell it today you would earn a total of 455.00 from holding Small Cap Value Series or generate 33.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Series vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Small Cap Value |
| Inverse Nasdaq 100 |
Small Cap and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Inverse Nasdaq-100
The main advantage of trading using opposite Small Cap and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Inverse 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 Inverse Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's long position.| Small Cap vs. Hennessy Nerstone Mid | Small Cap vs. Boston Partners Small | Small Cap vs. Fidelity Small Cap | Small Cap vs. Ab Discovery Value |
| Inverse Nasdaq-100 vs. Amg River Road | Inverse Nasdaq-100 vs. Ultramid Cap Profund Ultramid Cap | Inverse Nasdaq-100 vs. Small Cap Value Series | Inverse Nasdaq-100 vs. Valic Company I |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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