Correlation Between Sp 500 and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Sp 500 and Inverse Nasdaq-100 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 Sp 500 and Inverse Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 2x and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Sp 500 and Inverse Nasdaq-100 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 Sp 500 with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Inverse Nasdaq-100.
Diversification Opportunities for Sp 500 and Inverse Nasdaq-100
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RYCTX and Inverse is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 2x and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Sp 500 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 Sp 500 2x are associated (or correlated) with Inverse Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Sp 500 i.e., Sp 500 and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Sp 500 and Inverse Nasdaq-100
Assuming the 90 days horizon Sp 500 2x is expected to generate 1.44 times more return on investment than Inverse Nasdaq-100. However, Sp 500 is 1.44 times more volatile than Inverse Nasdaq 100 Strategy. It trades about 0.08 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.08 per unit of risk. If you would invest 14,768 in Sp 500 2x on October 20, 2024 and sell it today you would earn a total of 12,175 from holding Sp 500 2x or generate 82.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 2x vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Sp 500 2x |
| Inverse Nasdaq 100 |
Sp 500 and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Inverse Nasdaq-100
The main advantage of trading using opposite Sp 500 and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Inverse Nasdaq-100 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 Inverse Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's long position.| Sp 500 vs. Predex Funds | Sp 500 vs. Nasdaq 100 Profund Nasdaq 100 | Sp 500 vs. Jp Morgan Smartretirement | Sp 500 vs. Tax Managed Large Cap |
| Inverse Nasdaq-100 vs. Lord Abbett Government | Inverse Nasdaq-100 vs. Dreyfus Government Cash | Inverse Nasdaq-100 vs. Short Term Government Fund | Inverse Nasdaq-100 vs. Dws Government Money |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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