Correlation Between Nasdaq-100 Fund and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Fund 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 Nasdaq-100 Fund 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 Nasdaq 100 Fund Class and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Nasdaq-100 Fund 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 Nasdaq-100 Fund with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Fund and Inverse Nasdaq-100.
Diversification Opportunities for Nasdaq-100 Fund and Inverse Nasdaq-100
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nasdaq-100 and Inverse is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class 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 Nasdaq-100 Fund 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 Nasdaq 100 Fund Class 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 Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Nasdaq-100 Fund and Inverse Nasdaq-100
Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to under-perform the Inverse Nasdaq-100. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nasdaq 100 Fund Class is 284.46 times less risky than Inverse Nasdaq-100. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Inverse Nasdaq 100 Strategy is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,339 in Inverse Nasdaq 100 Strategy on November 28, 2024 and sell it today you would earn a total of 12,127 from holding Inverse Nasdaq 100 Strategy or generate 905.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Fund Class vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Nasdaq 100 Fund |
| Inverse Nasdaq 100 |
Nasdaq-100 Fund and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Fund and Inverse Nasdaq-100
The main advantage of trading using opposite Nasdaq-100 Fund and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Fund 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.| Nasdaq-100 Fund vs. Nasdaq 100 Fund Class | Nasdaq-100 Fund vs. Nasdaq 100 Fund Class | Nasdaq-100 Fund vs. Nasdaq 100 2x Strategy | Nasdaq-100 Fund vs. Dow 2x Strategy |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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