Correlation Between Inverse Nasdaq-100 and Financial Services
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Financial Services 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 Financial Services 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 Financial Services Fund, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Financial Services 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 Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Financial Services.
Diversification Opportunities for Inverse Nasdaq-100 and Financial Services
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and Financial is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services 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 Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Financial Services go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Financial Services
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Financial Services. In addition to that, Inverse Nasdaq-100 is 1.3 times more volatile than Financial Services Fund. It trades about -0.06 of its total potential returns per unit of risk. Financial Services Fund is currently generating about 0.14 per unit of volatility. If you would invest 7,012 in Financial Services Fund on August 29, 2024 and sell it today you would earn a total of 3,428 from holding Financial Services Fund or generate 48.89% 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. Financial Services Fund
Performance |
| Timeline |
| Inverse Nasdaq 100 |
| Financial Services |
Inverse Nasdaq-100 and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq-100 and Financial Services
The main advantage of trading using opposite Inverse Nasdaq-100 and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.| Inverse Nasdaq-100 vs. Alternative Asset Allocation | Inverse Nasdaq-100 vs. Goldman Sachs Large | Inverse Nasdaq-100 vs. T Rowe Price | Inverse Nasdaq-100 vs. Old Westbury Large |
| Financial Services vs. Health Care Fund | Financial Services vs. Banking Fund Investor | Financial Services vs. Technology Fund Investor | Financial Services vs. Transportation 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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