Correlation Between Dow 2x and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Dow 2x 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 Dow 2x 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 Dow 2x Strategy and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Dow 2x 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 Dow 2x with a short position of Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Inverse Nasdaq-100.
Diversification Opportunities for Dow 2x and Inverse Nasdaq-100
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Inverse is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy 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 Dow 2x 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 Dow 2x Strategy 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 Dow 2x i.e., Dow 2x and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Dow 2x and Inverse Nasdaq-100
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 1.65 times more return on investment than Inverse Nasdaq-100. However, Dow 2x is 1.65 times more volatile than Inverse Nasdaq 100 Strategy. It trades about 0.16 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.05 per unit of risk. If you would invest 14,532 in Dow 2x Strategy on August 30, 2024 and sell it today you would earn a total of 1,607 from holding Dow 2x Strategy or generate 11.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Dow 2x Strategy vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Dow 2x Strategy |
| Inverse Nasdaq 100 |
Dow 2x and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Inverse Nasdaq-100
The main advantage of trading using opposite Dow 2x and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x 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.| Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Ultramid Cap Profund Ultramid Cap | Dow 2x vs. Nasdaq 100 2x Strategy |
| Inverse Nasdaq-100 vs. T Rowe Price | Inverse Nasdaq-100 vs. Ab High Income | Inverse Nasdaq-100 vs. Multimanager Lifestyle Aggressive | Inverse Nasdaq-100 vs. California High Yield Municipal |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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