Correlation Between Inverse Nasdaq-100 and Inverse Mid-cap
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Inverse Mid-cap 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 Inverse Mid-cap 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 Inverse Mid Cap Strategy, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Inverse Mid-cap 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 Inverse Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Inverse Mid-cap.
Diversification Opportunities for Inverse Nasdaq-100 and Inverse Mid-cap
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Inverse and Inverse is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Inverse Mid Cap Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Mid Cap 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 Inverse Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Mid Cap has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Inverse Mid-cap go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Inverse Mid-cap
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to generate 0.95 times more return on investment than Inverse Mid-cap. However, Inverse Nasdaq 100 Strategy is 1.05 times less risky than Inverse Mid-cap. It trades about -0.07 of its potential returns per unit of risk. Inverse Mid Cap Strategy is currently generating about -0.23 per unit of risk. If you would invest 1,560 in Inverse Nasdaq 100 Strategy on August 27, 2024 and sell it today you would lose (28.00) from holding Inverse Nasdaq 100 Strategy or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Inverse Mid Cap Strategy
Performance |
| Timeline |
| Inverse Nasdaq 100 |
| Inverse Mid Cap |
Inverse Nasdaq-100 and Inverse Mid-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq-100 and Inverse Mid-cap
The main advantage of trading using opposite Inverse Nasdaq-100 and Inverse Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Inverse Mid-cap 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 Inverse Mid-cap will offset losses from the drop in Inverse Mid-cap's long position.| Inverse Nasdaq-100 vs. Basic Materials Fund | Inverse Nasdaq-100 vs. Basic Materials Fund | Inverse Nasdaq-100 vs. Banking Fund Class | Inverse Nasdaq-100 vs. Basic Materials Fund |
| Inverse Mid-cap vs. Eic Value Fund | Inverse Mid-cap vs. Archer Balanced Fund | Inverse Mid-cap vs. Small Cap Stock | Inverse Mid-cap vs. Balanced Fund Investor |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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