Correlation Between Nasdaq-100(r) and Semiconductor Ultrasector
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Semiconductor Ultrasector 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 Semiconductor Ultrasector 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 Semiconductor Ultrasector Profund, you can compare the effects of market volatilities on Nasdaq-100(r) and Semiconductor Ultrasector 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 Semiconductor Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Semiconductor Ultrasector.
Diversification Opportunities for Nasdaq-100(r) and Semiconductor Ultrasector
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq-100(r) and Semiconductor is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Semiconductor Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Ultrasector 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 Semiconductor Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Ultrasector has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Semiconductor Ultrasector go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Semiconductor Ultrasector
Assuming the 90 days horizon Nasdaq-100(r) is expected to generate 1.99 times less return on investment than Semiconductor Ultrasector. But when comparing it to its historical volatility, Nasdaq 100 2x Strategy is 1.75 times less risky than Semiconductor Ultrasector. It trades about 0.06 of its potential returns per unit of risk. Semiconductor Ultrasector Profund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,316 in Semiconductor Ultrasector Profund on August 27, 2024 and sell it today you would earn a total of 987.00 from holding Semiconductor Ultrasector Profund or generate 42.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Semiconductor Ultrasector Prof
Performance |
| Timeline |
| Nasdaq 100 2x |
| Semiconductor Ultrasector |
Nasdaq-100(r) and Semiconductor Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Semiconductor Ultrasector
The main advantage of trading using opposite Nasdaq-100(r) and Semiconductor Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Semiconductor Ultrasector 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 Semiconductor Ultrasector will offset losses from the drop in Semiconductor Ultrasector's long position.| Nasdaq-100(r) vs. Direxion Monthly Nasdaq 100 | Nasdaq-100(r) vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Nasdaq-100(r) vs. Nasdaq 100 2x Strategy | Nasdaq-100(r) vs. Dow 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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