Correlation Between Nasdaq-100(r) and Value Fund
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Value 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 Nasdaq-100(r) and Value Fund 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 Value Fund Value, you can compare the effects of market volatilities on Nasdaq-100(r) and Value 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 Nasdaq-100(r) with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Value Fund.
Diversification Opportunities for Nasdaq-100(r) and Value Fund
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq-100(r) and Value is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Value Fund go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Value Fund
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.75 times more return on investment than Value Fund. However, Nasdaq-100(r) is 2.75 times more volatile than Value Fund Value. It trades about 0.2 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.36 per unit of risk. If you would invest 52,748 in Nasdaq 100 2x Strategy on September 1, 2024 and sell it today you would earn a total of 4,302 from holding Nasdaq 100 2x Strategy or generate 8.16% 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. Value Fund Value
Performance |
| Timeline |
| Nasdaq 100 2x |
| Value Fund Value |
Nasdaq-100(r) and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Value Fund
The main advantage of trading using opposite Nasdaq-100(r) and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Value 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 Value Fund will offset losses from the drop in Value Fund's long position.| Nasdaq-100(r) vs. Sp 500 2x | Nasdaq-100(r) vs. Inverse Nasdaq 100 2x | Nasdaq-100(r) vs. Inverse Sp 500 | Nasdaq-100(r) vs. Ultra Nasdaq 100 Profunds |
| Value Fund vs. Homestead Intermediate Bond | Value Fund vs. Short Term Bond Fund | Value Fund vs. Short Term Government Securities | Value Fund vs. Homestead Rural America |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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