Correlation Between Russell 2000 and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Russell 2000 and Inverse Nasdaq-100 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 Russell 2000 and Inverse Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell 2000 15x and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Russell 2000 and Inverse Nasdaq-100 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 Russell 2000 with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Inverse Nasdaq-100.
Diversification Opportunities for Russell 2000 and Inverse Nasdaq-100
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Russell and Inverse is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 15x and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Russell 2000 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 Russell 2000 15x are associated (or correlated) with Inverse Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Russell 2000 i.e., Russell 2000 and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Russell 2000 and Inverse Nasdaq-100
Assuming the 90 days horizon Russell 2000 15x is expected to generate 1.62 times more return on investment than Inverse Nasdaq-100. However, Russell 2000 is 1.62 times more volatile than Inverse Nasdaq 100 Strategy. It trades about 0.08 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.06 per unit of risk. If you would invest 4,555 in Russell 2000 15x on August 27, 2024 and sell it today you would earn a total of 1,891 from holding Russell 2000 15x or generate 41.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russell 2000 15x vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Russell 2000 15x |
| Inverse Nasdaq 100 |
Russell 2000 and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell 2000 and Inverse Nasdaq-100
The main advantage of trading using opposite Russell 2000 and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 position performs unexpectedly, Inverse Nasdaq-100 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 Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's long position.| Russell 2000 vs. Basic Materials Fund | Russell 2000 vs. Basic Materials Fund | Russell 2000 vs. Banking Fund Class | Russell 2000 vs. Basic Materials Fund |
| 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 |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |