Correlation Between Nasdaq-100 Index and Northern Stock
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index and Northern Stock 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 Nasdaq-100 Index and Northern Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Index Fund and Northern Stock Index, you can compare the effects of market volatilities on Nasdaq-100 Index and Northern Stock 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 Nasdaq-100 Index with a short position of Northern Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and Northern Stock.
Diversification Opportunities for Nasdaq-100 Index and Northern Stock
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Nasdaq-100 and Northern is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Northern Stock Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Stock Index and Nasdaq-100 Index 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 Nasdaq 100 Index Fund are associated (or correlated) with Northern Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Stock Index has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and Northern Stock go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and Northern Stock
Assuming the 90 days horizon Nasdaq-100 Index is expected to generate 1.2 times less return on investment than Northern Stock. In addition to that, Nasdaq-100 Index is 1.32 times more volatile than Northern Stock Index. It trades about 0.12 of its total potential returns per unit of risk. Northern Stock Index is currently generating about 0.18 per unit of volatility. If you would invest 5,986 in Northern Stock Index on August 29, 2024 and sell it today you would earn a total of 211.00 from holding Northern Stock Index or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. Northern Stock Index
Performance |
| Timeline |
| Nasdaq 100 Index |
| Northern Stock Index |
Nasdaq-100 Index and Northern Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Index and Northern Stock
The main advantage of trading using opposite Nasdaq-100 Index and Northern Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index position performs unexpectedly, Northern Stock 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 Northern Stock will offset losses from the drop in Northern Stock's long position.| Nasdaq-100 Index vs. Nasdaq 100 Index Fund | Nasdaq-100 Index vs. Nasdaq 100 Index Fund | Nasdaq-100 Index vs. Fidelity Zero Large | Nasdaq-100 Index vs. Vanguard Russell 2000 |
| Northern Stock vs. Northern Small Cap | Northern Stock vs. Northern International Equity | Northern Stock vs. Northern Mid Cap | Northern Stock vs. Northern Bond Index |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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