Correlation Between Nasdaq-100 Index and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index and Sp Smallcap 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 Sp Smallcap 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 Sp Smallcap Index, you can compare the effects of market volatilities on Nasdaq-100 Index and Sp Smallcap 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 Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and Sp Smallcap.
Diversification Opportunities for Nasdaq-100 Index and Sp Smallcap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq-100 and SMCIX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Sp Smallcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap Index has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and Sp Smallcap go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and Sp Smallcap
Assuming the 90 days horizon Nasdaq-100 Index is expected to generate 2.92 times less return on investment than Sp Smallcap. But when comparing it to its historical volatility, Nasdaq 100 Index Fund is 1.49 times less risky than Sp Smallcap. It trades about 0.12 of its potential returns per unit of risk. Sp Smallcap Index is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,374 in Sp Smallcap Index on August 29, 2024 and sell it today you would earn a total of 206.00 from holding Sp Smallcap Index or generate 8.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. Sp Smallcap Index
Performance |
| Timeline |
| Nasdaq 100 Index |
| Sp Smallcap Index |
Nasdaq-100 Index and Sp Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Index and Sp Smallcap
The main advantage of trading using opposite Nasdaq-100 Index and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap'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 |
| Sp Smallcap vs. Sp Midcap Index | Sp Smallcap vs. Sp 500 Index | Sp Smallcap vs. Nasdaq 100 Index Fund | Sp Smallcap vs. Deutsche Sp 500 |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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