Correlation Between Sp 500 and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both Sp 500 and Nasdaq-100(r) 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 Nasdaq-100(r) 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 Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Sp 500 and Nasdaq-100(r) 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 Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Nasdaq-100(r).
Diversification Opportunities for Sp 500 and Nasdaq-100(r)
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RYTNX and Nasdaq-100(r) is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 2x and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x 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 Nasdaq-100(r). 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 2x has no effect on the direction of Sp 500 i.e., Sp 500 and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between Sp 500 and Nasdaq-100(r)
Assuming the 90 days horizon Sp 500 2x is expected to generate 0.7 times more return on investment than Nasdaq-100(r). However, Sp 500 2x is 1.44 times less risky than Nasdaq-100(r). It trades about 0.13 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.09 per unit of risk. If you would invest 22,233 in Sp 500 2x on September 2, 2024 and sell it today you would earn a total of 13,775 from holding Sp 500 2x or generate 61.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 2x vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| Sp 500 2x |
| Nasdaq 100 2x |
Sp 500 and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Nasdaq-100(r)
The main advantage of trading using opposite Sp 500 and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Nasdaq-100(r) 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(r) will offset losses from the drop in Nasdaq-100(r)'s long position.| Sp 500 vs. Nasdaq 100 2x Strategy | Sp 500 vs. Direxion Monthly Nasdaq 100 | Sp 500 vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Sp 500 vs. Nasdaq 100 2x Strategy |
| Nasdaq-100(r) vs. Volumetric Fund Volumetric | Nasdaq-100(r) vs. Rbb Fund | Nasdaq-100(r) vs. Ab Value Fund | Nasdaq-100(r) vs. Vanguard Small Cap Growth |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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