Correlation Between Transportation Fund and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both Transportation Fund and Nasdaq-100(r) 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 Transportation Fund and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transportation Fund Class and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Transportation Fund and Nasdaq-100(r) 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 Transportation Fund with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportation Fund and Nasdaq-100(r).
Diversification Opportunities for Transportation Fund and Nasdaq-100(r)
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Transportation and Nasdaq-100(r) is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Transportation Fund Class and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Transportation 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 Transportation Fund Class are associated (or correlated) with Nasdaq-100(r). 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 2x has no effect on the direction of Transportation Fund i.e., Transportation Fund and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between Transportation Fund and Nasdaq-100(r)
Assuming the 90 days horizon Transportation Fund is expected to generate 6.12 times less return on investment than Nasdaq-100(r). But when comparing it to its historical volatility, Transportation Fund Class is 1.95 times less risky than Nasdaq-100(r). It trades about 0.02 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 45,713 in Nasdaq 100 2x Strategy on November 8, 2024 and sell it today you would earn a total of 12,219 from holding Nasdaq 100 2x Strategy or generate 26.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transportation Fund Class vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| Transportation Fund Class |
| Nasdaq 100 2x |
Transportation Fund and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transportation Fund and Nasdaq-100(r)
The main advantage of trading using opposite Transportation Fund and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportation Fund position performs unexpectedly, Nasdaq-100(r) 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(r) will offset losses from the drop in Nasdaq-100(r)'s long position.| Transportation Fund vs. Baillie Gifford Health | Transportation Fund vs. Deutsche Health And | Transportation Fund vs. Alphacentric Lifesci Healthcare | Transportation Fund vs. Hartford Healthcare Hls |
| Nasdaq-100(r) vs. Nasdaq 100 2x Strategy | 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 |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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