Correlation Between Nasdaq 100 and Feeder Cattle
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Feeder Cattle 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 Feeder Cattle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 and Feeder Cattle Futures, you can compare the effects of market volatilities on Nasdaq 100 and Feeder Cattle 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 Feeder Cattle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Feeder Cattle.
Diversification Opportunities for Nasdaq 100 and Feeder Cattle
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Feeder is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 and Feeder Cattle Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feeder Cattle Futures 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 Feeder Cattle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feeder Cattle Futures has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Feeder Cattle go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Feeder Cattle
Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.3 times more return on investment than Feeder Cattle. However, Nasdaq 100 is 1.3 times more volatile than Feeder Cattle Futures. It trades about 0.08 of its potential returns per unit of risk. Feeder Cattle Futures is currently generating about 0.03 per unit of risk. If you would invest 1,743,675 in Nasdaq 100 on August 29, 2024 and sell it today you would earn a total of 355,475 from holding Nasdaq 100 or generate 20.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.66% |
| Values | Daily Returns |
Nasdaq 100 vs. Feeder Cattle Futures
Performance |
| Timeline |
| Nasdaq 100 |
| Feeder Cattle Futures |
Nasdaq 100 and Feeder Cattle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Feeder Cattle
The main advantage of trading using opposite Nasdaq 100 and Feeder Cattle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Feeder Cattle 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 Feeder Cattle will offset losses from the drop in Feeder Cattle's long position.| Nasdaq 100 vs. Corn Futures | Nasdaq 100 vs. Five Year Treasury Note | Nasdaq 100 vs. Live Cattle Futures | Nasdaq 100 vs. Lean Hogs Futures |
| Feeder Cattle vs. Sugar | Feeder Cattle vs. Micro Gold Futures | Feeder Cattle vs. Heating Oil | Feeder Cattle vs. Platinum |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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