Correlation Between Nasdaq 100 and E Mini
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and E Mini 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 E Mini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 and E Mini SP 500, you can compare the effects of market volatilities on Nasdaq 100 and E Mini 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 E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and E Mini.
Diversification Opportunities for Nasdaq 100 and E Mini
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq and ESUSD is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP 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 are associated (or correlated) with E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and E Mini go up and down completely randomly.
Pair Corralation between Nasdaq 100 and E Mini
Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.76 times more return on investment than E Mini. However, Nasdaq 100 is 1.76 times more volatile than E Mini SP 500. It trades about 0.4 of its potential returns per unit of risk. E Mini SP 500 is currently generating about 0.4 per unit of risk. If you would invest 2,063,350 in Nasdaq 100 on September 19, 2024 and sell it today you would earn a total of 137,825 from holding Nasdaq 100 or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Nasdaq 100 vs. E Mini SP 500
Performance |
| Timeline |
| Nasdaq 100 |
| E Mini SP |
Nasdaq 100 and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and E Mini
The main advantage of trading using opposite Nasdaq 100 and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, E Mini 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 E Mini will offset losses from the drop in E Mini's long position.| Nasdaq 100 vs. Orange Juice | Nasdaq 100 vs. Brent Crude Oil | Nasdaq 100 vs. Natural Gas | Nasdaq 100 vs. Five Year Treasury Note |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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