Correlation Between IShares Nasdaq and Freedom Day
Can any of the company-specific risk be diversified away by investing in both IShares Nasdaq and Freedom Day 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 IShares Nasdaq and Freedom Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Nasdaq 100 ex and Freedom Day Dividend, you can compare the effects of market volatilities on IShares Nasdaq and Freedom Day 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 IShares Nasdaq with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Nasdaq and Freedom Day.
Diversification Opportunities for IShares Nasdaq and Freedom Day
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and Freedom is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares Nasdaq 100 ex and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and IShares Nasdaq 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 iShares Nasdaq 100 ex are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of IShares Nasdaq i.e., IShares Nasdaq and Freedom Day go up and down completely randomly.
Pair Corralation between IShares Nasdaq and Freedom Day
Given the investment horizon of 90 days iShares Nasdaq 100 ex is expected to generate 1.16 times more return on investment than Freedom Day. However, IShares Nasdaq is 1.16 times more volatile than Freedom Day Dividend. It trades about 0.16 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.12 per unit of risk. If you would invest 2,483 in iShares Nasdaq 100 ex on September 1, 2024 and sell it today you would earn a total of 108.00 from holding iShares Nasdaq 100 ex or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 21.43% |
| Values | Daily Returns |
iShares Nasdaq 100 ex vs. Freedom Day Dividend
Performance |
| Timeline |
| iShares Nasdaq 100 |
| Freedom Day Dividend |
IShares Nasdaq and Freedom Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Nasdaq and Freedom Day
The main advantage of trading using opposite IShares Nasdaq and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Nasdaq position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day's long position.| IShares Nasdaq vs. Vanguard Growth Index | IShares Nasdaq vs. iShares Russell 1000 | IShares Nasdaq vs. iShares SP 500 | IShares Nasdaq vs. iShares Core SP |
| Freedom Day vs. iShares Core SP | Freedom Day vs. iShares Core MSCI | Freedom Day vs. iShares Broad USD | Freedom Day vs. iShares Core 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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