Correlation Between Nasdaq-100(r) and Northern Emerging
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Northern Emerging 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(r) and Northern Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Northern Emerging Markets, you can compare the effects of market volatilities on Nasdaq-100(r) and Northern Emerging 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(r) with a short position of Northern Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Northern Emerging.
Diversification Opportunities for Nasdaq-100(r) and Northern Emerging
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nasdaq-100(r) and Northern is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Northern Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Emerging Markets and Nasdaq-100(r) 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 2x Strategy are associated (or correlated) with Northern Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Emerging Markets has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Northern Emerging go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Northern Emerging
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.27 times more return on investment than Northern Emerging. However, Nasdaq-100(r) is 2.27 times more volatile than Northern Emerging Markets. It trades about 0.24 of its potential returns per unit of risk. Northern Emerging Markets is currently generating about -0.14 per unit of risk. If you would invest 52,764 in Nasdaq 100 2x Strategy on September 1, 2024 and sell it today you would earn a total of 5,297 from holding Nasdaq 100 2x Strategy or generate 10.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Northern Emerging Markets
Performance |
| Timeline |
| Nasdaq 100 2x |
| Northern Emerging Markets |
Nasdaq-100(r) and Northern Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Northern Emerging
The main advantage of trading using opposite Nasdaq-100(r) and Northern Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Northern Emerging 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 Northern Emerging will offset losses from the drop in Northern Emerging's long position.| Nasdaq-100(r) vs. Nasdaq 100 2x Strategy | Nasdaq-100(r) vs. Direxion Monthly Nasdaq 100 | Nasdaq-100(r) vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Nasdaq-100(r) vs. Nasdaq 100 2x Strategy |
| Northern Emerging vs. Jpmorgan Trust I | Northern Emerging vs. Cref Money Market | Northern Emerging vs. Franklin Government Money | Northern Emerging vs. Prudential 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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