Correlation Between Nasdaq 100 and Consumer Services
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Consumer 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 Nasdaq 100 and Consumer Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Consumer Services Ultrasector, you can compare the effects of market volatilities on Nasdaq 100 and Consumer 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 Nasdaq 100 with a short position of Consumer Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Consumer Services.
Diversification Opportunities for Nasdaq 100 and Consumer Services
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and Consumer is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Consumer Services Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Services and 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 Nasdaq 100 2x Strategy are associated (or correlated) with Consumer Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Services has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Consumer Services go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Consumer Services
Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.45 times less return on investment than Consumer Services. In addition to that, Nasdaq 100 is 1.18 times more volatile than Consumer Services Ultrasector. It trades about 0.28 of its total potential returns per unit of risk. Consumer Services Ultrasector is currently generating about 0.47 per unit of volatility. If you would invest 6,290 in Consumer Services Ultrasector on September 5, 2024 and sell it today you would earn a total of 1,170 from holding Consumer Services Ultrasector or generate 18.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Consumer Services Ultrasector
Performance |
| Timeline |
| Nasdaq 100 2x |
| Consumer Services |
Nasdaq 100 and Consumer Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Consumer Services
The main advantage of trading using opposite Nasdaq 100 and Consumer Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Consumer 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 Consumer Services will offset losses from the drop in Consumer Services' long position.| Nasdaq 100 vs. Gabelli Gold Fund | Nasdaq 100 vs. Precious Metals And | Nasdaq 100 vs. Vy Goldman Sachs | Nasdaq 100 vs. James Balanced Golden |
| Consumer Services vs. Internet Ultrasector Profund | Consumer Services vs. Biotechnology Ultrasector Profund | Consumer Services vs. Nasdaq 100 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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