Correlation Between Inverse Nasdaq-100 and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Nasdaq-100(r) 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 Inverse Nasdaq-100 and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Nasdaq 100 Strategy and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Nasdaq-100(r) 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 Inverse Nasdaq-100 with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Nasdaq-100(r).
Diversification Opportunities for Inverse Nasdaq-100 and Nasdaq-100(r)
-1.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between INVERSE and Nasdaq-100(r) is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Inverse 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 Inverse Nasdaq 100 Strategy are associated (or correlated) with Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Nasdaq-100(r)
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Nasdaq-100(r). But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Nasdaq 100 Strategy is 1.8 times less risky than Nasdaq-100(r). The mutual fund trades about -0.07 of its potential returns per unit of risk. The Nasdaq 100 2x Strategy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 26,789 in Nasdaq 100 2x Strategy on August 26, 2024 and sell it today you would earn a total of 14,388 from holding Nasdaq 100 2x Strategy or generate 53.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| Inverse Nasdaq 100 |
| Nasdaq 100 2x |
Inverse Nasdaq-100 and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq-100 and Nasdaq-100(r)
The main advantage of trading using opposite Inverse Nasdaq-100 and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.| Inverse Nasdaq-100 vs. Pia High Yield | Inverse Nasdaq-100 vs. Fidelity Capital Income | Inverse Nasdaq-100 vs. Siit High Yield | Inverse Nasdaq-100 vs. Dunham High Yield |
| Nasdaq-100(r) vs. Direxion Monthly Nasdaq 100 | Nasdaq-100(r) vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Nasdaq-100(r) vs. Nasdaq 100 2x Strategy | Nasdaq-100(r) vs. Dow 2x Strategy |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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