Correlation Between Inverse Nasdaq-100 and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Dow Jones.
Diversification Opportunities for Inverse Nasdaq-100 and Dow Jones
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and Dow is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Dow Jones go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Dow Jones
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Dow Jones. In addition to that, Inverse Nasdaq-100 is 1.21 times more volatile than Dow Jones Industrial. It trades about -0.07 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.22 per unit of volatility. If you would invest 10,195 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 461.00 from holding Dow Jones Industrial or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Dow Jones Industrial
Performance |
| Timeline |
| Inverse Nasdaq 100 |
| Dow Jones Industrial |
Inverse Nasdaq-100 and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq-100 and Dow Jones
The main advantage of trading using opposite Inverse Nasdaq-100 and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Inverse Nasdaq-100 vs. Georgia Tax Free Bond | Inverse Nasdaq-100 vs. Morningstar Defensive Bond | Inverse Nasdaq-100 vs. Artisan High Income | Inverse Nasdaq-100 vs. T Rowe Price |
| Dow Jones vs. Basic Materials Fund | Dow Jones vs. Basic Materials Fund | Dow Jones vs. Banking Fund Class | Dow Jones 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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