Correlation Between Nasdaq-100(r) and Paradigm Micro-cap
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Paradigm Micro-cap 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(r) and Paradigm Micro-cap 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 Paradigm Micro Cap Fund, you can compare the effects of market volatilities on Nasdaq-100(r) and Paradigm Micro-cap 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(r) with a short position of Paradigm Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Paradigm Micro-cap.
Diversification Opportunities for Nasdaq-100(r) and Paradigm Micro-cap
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq-100(r) and Paradigm is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Paradigm Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Micro Cap and Nasdaq-100(r) 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 Paradigm Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Micro Cap has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Paradigm Micro-cap go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Paradigm Micro-cap
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.54 times more return on investment than Paradigm Micro-cap. However, Nasdaq-100(r) is 1.54 times more volatile than Paradigm Micro Cap Fund. It trades about 0.1 of its potential returns per unit of risk. Paradigm Micro Cap Fund is currently generating about 0.06 per unit of risk. If you would invest 23,346 in Nasdaq 100 2x Strategy on August 29, 2024 and sell it today you would earn a total of 17,678 from holding Nasdaq 100 2x Strategy or generate 75.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Paradigm Micro Cap Fund
Performance |
| Timeline |
| Nasdaq 100 2x |
| Paradigm Micro Cap |
Nasdaq-100(r) and Paradigm Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Paradigm Micro-cap
The main advantage of trading using opposite Nasdaq-100(r) and Paradigm Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Paradigm Micro-cap 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 Paradigm Micro-cap will offset losses from the drop in Paradigm Micro-cap's long position.| Nasdaq-100(r) vs. Sterling Capital Short | Nasdaq-100(r) vs. Jhancock Short Duration | Nasdaq-100(r) vs. Rbc Short Duration | Nasdaq-100(r) vs. Federated Short Intermediate Duration |
| Paradigm Micro-cap vs. Vanguard Small Cap Index | Paradigm Micro-cap vs. T Rowe Price | Paradigm Micro-cap vs. HUMANA INC | Paradigm Micro-cap vs. Aquagold International |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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