Correlation Between Nasdaq 100 and Vela Small
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Vela Small 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 Vela Small 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 Vela Small Cap, you can compare the effects of market volatilities on Nasdaq 100 and Vela Small 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 Vela Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Vela Small.
Diversification Opportunities for Nasdaq 100 and Vela Small
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and Vela is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Vela Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Small Cap 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 Vela Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Small Cap has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Vela Small go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Vela Small
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.54 times more return on investment than Vela Small. However, Nasdaq 100 is 2.54 times more volatile than Vela Small Cap. It trades about 0.09 of its potential returns per unit of risk. Vela Small Cap is currently generating about 0.06 per unit of risk. If you would invest 16,265 in Nasdaq 100 2x Strategy on September 3, 2024 and sell it today you would earn a total of 25,469 from holding Nasdaq 100 2x Strategy or generate 156.59% 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. Vela Small Cap
Performance |
| Timeline |
| Nasdaq 100 2x |
| Vela Small Cap |
Nasdaq 100 and Vela Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Vela Small
The main advantage of trading using opposite Nasdaq 100 and Vela Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Vela Small 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 Vela Small will offset losses from the drop in Vela Small's long position.| Nasdaq 100 vs. The Hartford Emerging | Nasdaq 100 vs. Kinetics Market Opportunities | Nasdaq 100 vs. Morgan Stanley Emerging | Nasdaq 100 vs. Locorr Market Trend |
| Vela Small vs. Barings Emerging Markets | Vela Small vs. Nasdaq 100 2x Strategy | Vela Small vs. T Rowe Price | Vela Small vs. Shelton Emerging Markets |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |