Correlation Between Banking Fund and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Banking 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 Banking 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 Banking Fund Class and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Banking 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 Banking Fund with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Inverse Nasdaq-100.
Diversification Opportunities for Banking Fund and Inverse Nasdaq-100
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Banking and INVERSE is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Banking 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 Banking 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 Banking 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 Banking Fund i.e., Banking Fund and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Banking Fund and Inverse Nasdaq-100
Assuming the 90 days horizon Banking Fund Class is expected to generate 1.16 times more return on investment than Inverse Nasdaq-100. However, Banking Fund is 1.16 times more volatile than Inverse Nasdaq 100 Strategy. It trades about 0.11 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 6,833 in Banking Fund Class on August 27, 2024 and sell it today you would earn a total of 3,191 from holding Banking Fund Class or generate 46.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Banking Fund Class |
| Inverse Nasdaq 100 |
Banking Fund and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Inverse Nasdaq-100
The main advantage of trading using opposite Banking Fund and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking 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.| Banking Fund vs. Financial Services Fund | Banking Fund vs. Health Care Fund | Banking Fund vs. Retailing Fund Investor | Banking Fund vs. Technology Fund Investor |
| Inverse Nasdaq-100 vs. Pia High Yield | Inverse Nasdaq-100 vs. Fidelity Capital Income | Inverse Nasdaq-100 vs. Siit High Yield | Inverse Nasdaq-100 vs. Dunham High Yield |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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