Correlation Between Nasdaq 100 and Sp 500
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Sp 500 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 and Sp 500 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 500 Index, you can compare the effects of market volatilities on Nasdaq 100 and Sp 500 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 with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Sp 500.
Diversification Opportunities for Nasdaq 100 and Sp 500
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq and SPFIX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Sp 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Index and Nasdaq 100 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 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Index has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Sp 500 go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Sp 500
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 0.77 times more return on investment than Sp 500. However, Nasdaq 100 Index Fund is 1.3 times less risky than Sp 500. It trades about -0.07 of its potential returns per unit of risk. Sp 500 Index is currently generating about -0.1 per unit of risk. If you would invest 3,828 in Nasdaq 100 Index Fund on September 1, 2024 and sell it today you would lose (123.00) from holding Nasdaq 100 Index Fund or give up 3.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. Sp 500 Index
Performance |
| Timeline |
| Nasdaq 100 Index |
| Sp 500 Index |
Nasdaq 100 and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Sp 500
The main advantage of trading using opposite Nasdaq 100 and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Sp 500 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 500 will offset losses from the drop in Sp 500's long position.| Nasdaq 100 vs. Shelton Emerging Markets | Nasdaq 100 vs. Shelton Emerging Markets | Nasdaq 100 vs. California Tax Free Income | Nasdaq 100 vs. Shelton Funds |
| Sp 500 vs. Sp Midcap Index | Sp 500 vs. Sp Smallcap Index | Sp 500 vs. Deutsche Equity 500 | Sp 500 vs. Dreyfus Institutional Sp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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