Correlation Between Inverse Nasdaq-100 and Monthly Rebalance
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Monthly Rebalance 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 Monthly Rebalance 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 Monthly Rebalance Nasdaq 100, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Monthly Rebalance 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 Monthly Rebalance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Monthly Rebalance.
Diversification Opportunities for Inverse Nasdaq-100 and Monthly Rebalance
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and Monthly is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Monthly Rebalance Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monthly Rebalance 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 Monthly Rebalance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monthly Rebalance has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Monthly Rebalance go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Monthly Rebalance
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Monthly Rebalance. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Nasdaq 100 Strategy is 1.98 times less risky than Monthly Rebalance. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Monthly Rebalance Nasdaq 100 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 60,331 in Monthly Rebalance Nasdaq 100 on August 24, 2024 and sell it today you would earn a total of 3,314 from holding Monthly Rebalance Nasdaq 100 or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Monthly Rebalance Nasdaq 100
Performance |
| Timeline |
| Inverse Nasdaq 100 |
| Monthly Rebalance |
Inverse Nasdaq-100 and Monthly Rebalance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq-100 and Monthly Rebalance
The main advantage of trading using opposite Inverse Nasdaq-100 and Monthly Rebalance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Monthly Rebalance 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 Monthly Rebalance will offset losses from the drop in Monthly Rebalance's long position.| Inverse Nasdaq-100 vs. Amg River Road | Inverse Nasdaq-100 vs. Ultramid Cap Profund Ultramid Cap | Inverse Nasdaq-100 vs. Small Cap Value Series | Inverse Nasdaq-100 vs. Valic Company I |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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