Correlation Between Nasdaq-100 Fund and Biotechnology Fund
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Fund and Biotechnology 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 Nasdaq-100 Fund and Biotechnology Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Fund Class and Biotechnology Fund Class, you can compare the effects of market volatilities on Nasdaq-100 Fund and Biotechnology 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 Nasdaq-100 Fund with a short position of Biotechnology Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Fund and Biotechnology Fund.
Diversification Opportunities for Nasdaq-100 Fund and Biotechnology Fund
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nasdaq-100 and BIOTECHNOLOGY is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Biotechnology Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Fund Class and Nasdaq-100 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 Nasdaq 100 Fund Class are associated (or correlated) with Biotechnology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Fund Class has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Biotechnology Fund go up and down completely randomly.
Pair Corralation between Nasdaq-100 Fund and Biotechnology Fund
Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to generate 0.65 times more return on investment than Biotechnology Fund. However, Nasdaq 100 Fund Class is 1.54 times less risky than Biotechnology Fund. It trades about 0.2 of its potential returns per unit of risk. Biotechnology Fund Class is currently generating about 0.05 per unit of risk. If you would invest 5,920 in Nasdaq 100 Fund Class on September 1, 2024 and sell it today you would earn a total of 249.00 from holding Nasdaq 100 Fund Class or generate 4.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Fund Class vs. Biotechnology Fund Class
Performance |
| Timeline |
| Nasdaq 100 Fund |
| Biotechnology Fund Class |
Nasdaq-100 Fund and Biotechnology Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Fund and Biotechnology Fund
The main advantage of trading using opposite Nasdaq-100 Fund and Biotechnology Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Fund position performs unexpectedly, Biotechnology 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 Biotechnology Fund will offset losses from the drop in Biotechnology Fund's long position.| 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 |
| Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Basic Materials Fund | Biotechnology Fund vs. Sp Midcap 400 |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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