Correlation Between Nasdaq-100(r) and Health Care
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) 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 Nasdaq-100(r) and Health Care 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 Health Care Fund, you can compare the effects of market volatilities on Nasdaq-100(r) 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 Nasdaq-100(r) with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Health Care.
Diversification Opportunities for Nasdaq-100(r) and Health Care
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nasdaq-100(r) and Health is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x 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 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 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 Nasdaq-100(r) i.e., Nasdaq-100(r) and Health Care go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Health Care
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.26 times more return on investment than Health Care. However, Nasdaq-100(r) is 2.26 times more volatile than Health Care Fund. It trades about 0.23 of its potential returns per unit of risk. Health Care Fund is currently generating about 0.1 per unit of risk. If you would invest 37,952 in Nasdaq 100 2x Strategy on September 1, 2024 and sell it today you would earn a total of 3,782 from holding Nasdaq 100 2x Strategy or generate 9.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Health Care Fund
Performance |
| Timeline |
| Nasdaq 100 2x |
| Health Care Fund |
Nasdaq-100(r) and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Health Care
The main advantage of trading using opposite Nasdaq-100(r) and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) 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.| Nasdaq-100(r) vs. Bbh Partner Fund | Nasdaq-100(r) vs. Volumetric Fund Volumetric | Nasdaq-100(r) vs. Commonwealth Global Fund | Nasdaq-100(r) vs. Ab Value Fund |
| Health Care vs. Kinetics Small Cap | Health Care vs. Victory Rs Small | Health Care vs. Tax Managed Mid Small | Health Care vs. Artisan Small Cap |
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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