Correlation Between Nasdaq-100 Fund and Energy Fund
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Fund and Energy 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 Energy 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 Energy Fund Class, you can compare the effects of market volatilities on Nasdaq-100 Fund and Energy 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 Energy Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Fund and Energy Fund.
Diversification Opportunities for Nasdaq-100 Fund and Energy Fund
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq-100 and Energy is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Energy Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy 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 Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Class has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Energy Fund go up and down completely randomly.
Pair Corralation between Nasdaq-100 Fund and Energy Fund
Assuming the 90 days horizon Nasdaq-100 Fund is expected to generate 1.69 times less return on investment than Energy Fund. But when comparing it to its historical volatility, Nasdaq 100 Fund Class is 1.14 times less risky than Energy Fund. It trades about 0.2 of its potential returns per unit of risk. Energy Fund Class is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 19,679 in Energy Fund Class on September 1, 2024 and sell it today you would earn a total of 1,429 from holding Energy Fund Class or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Fund Class vs. Energy Fund Class
Performance |
| Timeline |
| Nasdaq 100 Fund |
| Energy Fund Class |
Nasdaq-100 Fund and Energy Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Fund and Energy Fund
The main advantage of trading using opposite Nasdaq-100 Fund and Energy Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Fund position performs unexpectedly, Energy 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 Energy Fund will offset losses from the drop in Energy 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 |
| Energy Fund vs. Basic Materials Fund | Energy Fund vs. Electronics Fund Investor | Energy Fund vs. Health Care Fund | Energy Fund vs. Precious Metals Fund |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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