Correlation Between Inverse Nasdaq-100 and Health Care
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Health Care 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 Health Care 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 Health Care Fund, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Health Care.
Diversification Opportunities for Inverse Nasdaq-100 and Health Care
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inverse and Health is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Health Care go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Health Care
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Health Care. In addition to that, Inverse Nasdaq-100 is 1.1 times more volatile than Health Care Fund. It trades about -0.21 of its total potential returns per unit of risk. Health Care Fund is currently generating about 0.1 per unit of volatility. If you would invest 3,769 in Health Care Fund on September 1, 2024 and sell it today you would earn a total of 71.00 from holding Health Care Fund or generate 1.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Health Care Fund
Performance |
| Timeline |
| Inverse Nasdaq 100 |
| Health Care Fund |
Inverse Nasdaq-100 and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq-100 and Health Care
The main advantage of trading using opposite Inverse Nasdaq-100 and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Inverse Nasdaq-100 vs. Amg River Road | Inverse Nasdaq-100 vs. Boston Partners Small | Inverse Nasdaq-100 vs. Mutual Of America | Inverse Nasdaq-100 vs. Mid Cap Value Profund |
| Health Care vs. Kinetics Small Cap | Health Care vs. Victory Rs Small | Health Care vs. Tax Managed Mid Small | Health Care vs. Artisan 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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