Correlation Between Nasdaq-100 Index and Us Government
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index and Us Government 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 Us Government 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 Us Government Securities, you can compare the effects of market volatilities on Nasdaq-100 Index and Us Government 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 Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and Us Government.
Diversification Opportunities for Nasdaq-100 Index and Us Government
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NASDAQ-100 and CAUKX is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities 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 Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and Us Government go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and Us Government
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 3.47 times more return on investment than Us Government. However, Nasdaq-100 Index is 3.47 times more volatile than Us Government Securities. It trades about 0.09 of its potential returns per unit of risk. Us Government Securities is currently generating about 0.02 per unit of risk. If you would invest 2,393 in Nasdaq 100 Index Fund on August 30, 2024 and sell it today you would earn a total of 1,600 from holding Nasdaq 100 Index Fund or generate 66.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. Us Government Securities
Performance |
| Timeline |
| Nasdaq 100 Index |
| Us Government Securities |
Nasdaq-100 Index and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Index and Us Government
The main advantage of trading using opposite Nasdaq-100 Index and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index position performs unexpectedly, Us Government 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 Us Government will offset losses from the drop in Us Government's long position.| Nasdaq-100 Index vs. Virtus Seix Government | Nasdaq-100 Index vs. Franklin Adjustable Government | Nasdaq-100 Index vs. Us Government Securities | Nasdaq-100 Index vs. Prudential Government Income |
| Us Government vs. Putnam Convertible Incm Gwth | Us Government vs. Rationalpier 88 Convertible | Us Government vs. Advent Claymore Convertible | Us Government vs. Calamos Dynamic Convertible |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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