Correlation Between Nasdaq 100 and Russell 2000
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Russell 2000 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 and Russell 2000 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 Russell 2000 2x, you can compare the effects of market volatilities on Nasdaq 100 and Russell 2000 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 with a short position of Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Russell 2000.
Diversification Opportunities for Nasdaq 100 and Russell 2000
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and Russell is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Russell 2000 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 2x and Nasdaq 100 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 Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 2x has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Russell 2000 go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Russell 2000
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 0.89 times more return on investment than Russell 2000. However, Nasdaq 100 2x Strategy is 1.13 times less risky than Russell 2000. It trades about 0.11 of its potential returns per unit of risk. Russell 2000 2x is currently generating about 0.05 per unit of risk. If you would invest 19,037 in Nasdaq 100 2x Strategy on September 12, 2024 and sell it today you would earn a total of 41,376 from holding Nasdaq 100 2x Strategy or generate 217.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Russell 2000 2x
Performance |
| Timeline |
| Nasdaq 100 2x |
| Russell 2000 2x |
Nasdaq 100 and Russell 2000 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Russell 2000
The main advantage of trading using opposite Nasdaq 100 and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.| Nasdaq 100 vs. Nasdaq 100 2x Strategy | Nasdaq 100 vs. Nasdaq 100 2x Strategy | Nasdaq 100 vs. Ultra Nasdaq 100 Profunds | Nasdaq 100 vs. Ultranasdaq 100 Profund Ultranasdaq 100 |
| Russell 2000 vs. Nasdaq 100 2x Strategy | Russell 2000 vs. Nasdaq 100 2x Strategy | Russell 2000 vs. Nasdaq 100 2x Strategy | Russell 2000 vs. Ultra Nasdaq 100 Profunds |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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