Correlation Between Inverse Nasdaq and Health Care
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq 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 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 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 with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq and Health Care.
Diversification Opportunities for Inverse Nasdaq 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 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 i.e., Inverse Nasdaq and Health Care go up and down completely randomly.
Pair Corralation between Inverse Nasdaq 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 is 1.59 times more volatile than Health Care Fund. It trades about -0.07 of its total potential returns per unit of risk. Health Care Fund is currently generating about 0.02 per unit of volatility. If you would invest 3,561 in Health Care Fund on September 3, 2024 and sell it today you would earn a total of 279.00 from holding Health Care Fund or generate 7.83% 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 and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Nasdaq and Health Care
The main advantage of trading using opposite Inverse Nasdaq and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq 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 vs. Columbia Real Estate | Inverse Nasdaq vs. Amg Managers Centersquare | Inverse Nasdaq vs. Commonwealth Real Estate | Inverse Nasdaq vs. Forum Real Estate |
| Health Care vs. Ab Global Risk | Health Care vs. Artisan High Income | Health Care vs. Gmo High Yield | Health Care vs. Ab Global Risk |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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