Correlation Between Inverse Nasdaq-100 and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Banking Fund 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 Banking Fund 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 Banking Fund Class, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Banking Fund 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 Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Banking Fund.
Diversification Opportunities for Inverse Nasdaq-100 and Banking Fund
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and Banking is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class 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 Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Banking Fund go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Banking Fund
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Banking Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Nasdaq 100 Strategy is 1.36 times less risky than Banking Fund. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Banking Fund Class is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,442 in Banking Fund Class on August 24, 2024 and sell it today you would earn a total of 2,389 from holding Banking Fund Class or generate 32.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Banking Fund Class
Performance |
| Timeline |
| Inverse Nasdaq 100 |
| Banking Fund Class |
Inverse Nasdaq-100 and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq-100 and Banking Fund
The main advantage of trading using opposite Inverse Nasdaq-100 and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Banking Fund 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 Banking Fund will offset losses from the drop in Banking Fund's long position.| Inverse Nasdaq-100 vs. Calvert Smallmid Cap A | Inverse Nasdaq-100 vs. Vy Columbia Small | Inverse Nasdaq-100 vs. Aqr Small Cap | Inverse Nasdaq-100 vs. Lebenthal Lisanti Small |
| Banking Fund vs. Pgim Jennison Diversified | Banking Fund vs. Vanguard Explorer Value | Banking Fund vs. Sentinel Small Pany | Banking Fund vs. Wasatch Small Cap |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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