Correlation Between Biotechnology Fund and Nasdaq-100 Fund
Can any of the company-specific risk be diversified away by investing in both Biotechnology Fund and Nasdaq-100 Fund 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 Biotechnology Fund and Nasdaq-100 Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biotechnology Fund Class and Nasdaq 100 Fund Class, you can compare the effects of market volatilities on Biotechnology Fund and Nasdaq-100 Fund 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 Biotechnology Fund with a short position of Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Nasdaq-100 Fund.
Diversification Opportunities for Biotechnology Fund and Nasdaq-100 Fund
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Biotechnology and Nasdaq-100 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Nasdaq 100 Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund and Biotechnology Fund 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 Biotechnology Fund Class are associated (or correlated) with Nasdaq-100 Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Nasdaq-100 Fund go up and down completely randomly.
Pair Corralation between Biotechnology Fund and Nasdaq-100 Fund
Assuming the 90 days horizon Biotechnology Fund Class is expected to under-perform the Nasdaq-100 Fund. In addition to that, Biotechnology Fund is 1.57 times more volatile than Nasdaq 100 Fund Class. It trades about -0.12 of its total potential returns per unit of risk. Nasdaq 100 Fund Class is currently generating about -0.02 per unit of volatility. If you would invest 5,962 in Nasdaq 100 Fund Class on November 1, 2024 and sell it today you would lose (186.00) from holding Nasdaq 100 Fund Class or give up 3.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.33% |
| Values | Daily Returns |
Biotechnology Fund Class vs. Nasdaq 100 Fund Class
Performance |
| Timeline |
| Biotechnology Fund Class |
| Nasdaq 100 Fund |
Biotechnology Fund and Nasdaq-100 Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Fund and Nasdaq-100 Fund
The main advantage of trading using opposite Biotechnology Fund and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund position performs unexpectedly, Nasdaq-100 Fund 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 Nasdaq-100 Fund will offset losses from the drop in Nasdaq-100 Fund's long position.| Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Banking Fund Class | Biotechnology Fund vs. Basic Materials Fund |
| Nasdaq-100 Fund vs. Nasdaq 100 2x Strategy | Nasdaq-100 Fund vs. Nova Fund Class | Nasdaq-100 Fund vs. Russell 2000 15x | Nasdaq-100 Fund vs. Nasdaq 100 Fund Class |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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