Correlation Between Energy Fund and Nasdaq-100 Fund
Can any of the company-specific risk be diversified away by investing in both Energy Fund and Nasdaq-100 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 Energy Fund and Nasdaq-100 Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Fund Class and Nasdaq 100 Fund Class, you can compare the effects of market volatilities on Energy Fund and Nasdaq-100 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 Energy Fund with a short position of Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Fund and Nasdaq-100 Fund.
Diversification Opportunities for Energy Fund and Nasdaq-100 Fund
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energy and Nasdaq-100 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Nasdaq 100 Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund and Energy 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 Energy Fund Class are associated (or correlated) with Nasdaq-100 Fund. 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 Fund has no effect on the direction of Energy Fund i.e., Energy Fund and Nasdaq-100 Fund go up and down completely randomly.
Pair Corralation between Energy Fund and Nasdaq-100 Fund
Assuming the 90 days horizon Energy Fund Class is expected to generate 1.14 times more return on investment than Nasdaq-100 Fund. However, Energy Fund is 1.14 times more volatile than Nasdaq 100 Fund Class. It trades about 0.3 of its potential returns per unit of risk. Nasdaq 100 Fund Class is currently generating about 0.2 per unit of risk. 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 |
Energy Fund Class vs. Nasdaq 100 Fund Class
Performance |
| Timeline |
| Energy Fund Class |
| Nasdaq 100 Fund |
Energy Fund and Nasdaq-100 Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Fund and Nasdaq-100 Fund
The main advantage of trading using opposite Energy Fund and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Fund position performs unexpectedly, Nasdaq-100 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 Nasdaq-100 Fund will offset losses from the drop in Nasdaq-100 Fund's long position.| Energy Fund vs. Basic Materials Fund | Energy Fund vs. Electronics Fund Investor | Energy Fund vs. Health Care Fund | Energy Fund vs. Precious Metals Fund |
| 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 |
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 CEOs Directory module to screen CEOs from public companies around the world.
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