Correlation Between Nasdaq-100(r) and Dow 2x
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Dow 2x 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 Dow 2x 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 Dow 2x Strategy, you can compare the effects of market volatilities on Nasdaq-100(r) and Dow 2x 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 Dow 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Dow 2x.
Diversification Opportunities for Nasdaq-100(r) and Dow 2x
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq-100(r) and Dow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Dow 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow 2x Strategy 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 Dow 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow 2x Strategy has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Dow 2x go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Dow 2x
Assuming the 90 days horizon Nasdaq-100(r) is expected to generate 1.29 times less return on investment than Dow 2x. In addition to that, Nasdaq-100(r) is 1.62 times more volatile than Dow 2x Strategy. It trades about 0.07 of its total potential returns per unit of risk. Dow 2x Strategy is currently generating about 0.15 per unit of volatility. If you would invest 14,772 in Dow 2x Strategy on September 1, 2024 and sell it today you would earn a total of 4,687 from holding Dow 2x Strategy or generate 31.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Dow 2x Strategy
Performance |
| Timeline |
| Nasdaq 100 2x |
| Dow 2x Strategy |
Nasdaq-100(r) and Dow 2x Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Dow 2x
The main advantage of trading using opposite Nasdaq-100(r) and Dow 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Dow 2x 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 Dow 2x will offset losses from the drop in Dow 2x'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 |
| Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Ultramid Cap Profund Ultramid Cap |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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