Correlation Between Rydex Inverse and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Rydex Inverse and Inverse Nasdaq-100 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 Rydex Inverse and Inverse Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rydex Inverse Nasdaq 100 and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Rydex Inverse and Inverse Nasdaq-100 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 Rydex Inverse with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rydex Inverse and Inverse Nasdaq-100.
Diversification Opportunities for Rydex Inverse and Inverse Nasdaq-100
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Rydex and Inverse is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Rydex Inverse Nasdaq 100 and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Rydex Inverse 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 Rydex Inverse Nasdaq 100 are associated (or correlated) with Inverse Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Rydex Inverse i.e., Rydex Inverse and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Rydex Inverse and Inverse Nasdaq-100
Assuming the 90 days horizon Rydex Inverse Nasdaq 100 is expected to under-perform the Inverse Nasdaq-100. In addition to that, Rydex Inverse is 1.91 times more volatile than Inverse Nasdaq 100 Strategy. It trades about -0.09 of its total potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.08 per unit of volatility. If you would invest 2,393 in Inverse Nasdaq 100 Strategy on August 30, 2024 and sell it today you would lose (930.00) from holding Inverse Nasdaq 100 Strategy or give up 38.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Rydex Inverse Nasdaq 100 vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Rydex Inverse Nasdaq |
| Inverse Nasdaq 100 |
Rydex Inverse and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rydex Inverse and Inverse Nasdaq-100
The main advantage of trading using opposite Rydex Inverse and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rydex Inverse position performs unexpectedly, Inverse Nasdaq-100 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 Inverse Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's long position.| Rydex Inverse vs. Basic Materials Fund | Rydex Inverse vs. Basic Materials Fund | Rydex Inverse vs. Banking Fund Class | Rydex Inverse vs. Basic Materials Fund |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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