Correlation Between Nasdaq-100(r) and Sp 500
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Sp 500 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 Sp 500 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 Sp 500 2x, you can compare the effects of market volatilities on Nasdaq-100(r) and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Sp 500.
Diversification Opportunities for Nasdaq-100(r) and Sp 500
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq-100(r) and RYTTX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Sp 500 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 2x 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 Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 2x has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Sp 500 go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Sp 500
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.43 times more return on investment than Sp 500. However, Nasdaq-100(r) is 1.43 times more volatile than Sp 500 2x. It trades about 0.08 of its potential returns per unit of risk. Sp 500 2x is currently generating about 0.11 per unit of risk. If you would invest 23,138 in Nasdaq 100 2x Strategy on August 31, 2024 and sell it today you would earn a total of 18,596 from holding Nasdaq 100 2x Strategy or generate 80.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Sp 500 2x
Performance |
| Timeline |
| Nasdaq 100 2x |
| Sp 500 2x |
Nasdaq-100(r) and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Sp 500
The main advantage of trading using opposite Nasdaq-100(r) and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.| Nasdaq-100(r) vs. Fisher Small Cap | Nasdaq-100(r) vs. Ab Small Cap | Nasdaq-100(r) vs. The Hartford Small | Nasdaq-100(r) vs. Tax Managed Mid Small |
| Sp 500 vs. Ab Discovery Value | Sp 500 vs. Mid Cap Value Profund | Sp 500 vs. Heartland Value Plus | Sp 500 vs. Boston Partners Small |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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