Correlation Between Russell 2000 and Nasdaq-100 Fund
Can any of the company-specific risk be diversified away by investing in both Russell 2000 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 Russell 2000 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 Russell 2000 15x and Nasdaq 100 Fund Investor, you can compare the effects of market volatilities on Russell 2000 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 Russell 2000 with a short position of Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Nasdaq-100 Fund.
Diversification Opportunities for Russell 2000 and Nasdaq-100 Fund
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Russell and Nasdaq-100 is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 15x and Nasdaq 100 Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund and Russell 2000 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 Russell 2000 15x 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 Russell 2000 i.e., Russell 2000 and Nasdaq-100 Fund go up and down completely randomly.
Pair Corralation between Russell 2000 and Nasdaq-100 Fund
Assuming the 90 days horizon Russell 2000 15x is expected to generate 1.75 times more return on investment than Nasdaq-100 Fund. However, Russell 2000 is 1.75 times more volatile than Nasdaq 100 Fund Investor. It trades about 0.05 of its potential returns per unit of risk. Nasdaq 100 Fund Investor is currently generating about 0.09 per unit of risk. If you would invest 3,400 in Russell 2000 15x on August 31, 2024 and sell it today you would earn a total of 1,301 from holding Russell 2000 15x or generate 38.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Russell 2000 15x vs. Nasdaq 100 Fund Investor
Performance |
| Timeline |
| Russell 2000 15x |
| Nasdaq 100 Fund |
Russell 2000 and Nasdaq-100 Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell 2000 and Nasdaq-100 Fund
The main advantage of trading using opposite Russell 2000 and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 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.| Russell 2000 vs. Vanguard Small Cap Growth | Russell 2000 vs. Nasdaq 100 Index Fund | Russell 2000 vs. Omni Small Cap Value | Russell 2000 vs. Semiconductor Ultrasector Profund |
| Nasdaq-100 Fund vs. Prudential Core Conservative | Nasdaq-100 Fund vs. Jhancock Diversified Macro | Nasdaq-100 Fund vs. Calvert Conservative Allocation | Nasdaq-100 Fund vs. Evaluator Conservative Rms |
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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