Correlation Between Nasdaq 100 and Oil Equipment
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Oil Equipment 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 Oil Equipment 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 Oil Equipment Services, you can compare the effects of market volatilities on Nasdaq 100 and Oil Equipment 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 Oil Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Oil Equipment.
Diversification Opportunities for Nasdaq 100 and Oil Equipment
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nasdaq and Oil is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Oil Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Equipment Services 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 Oil Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Equipment Services has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Oil Equipment go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Oil Equipment
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 0.69 times more return on investment than Oil Equipment. However, Nasdaq 100 2x Strategy is 1.46 times less risky than Oil Equipment. It trades about 0.08 of its potential returns per unit of risk. Oil Equipment Services is currently generating about -0.18 per unit of risk. If you would invest 59,242 in Nasdaq 100 2x Strategy on September 12, 2024 and sell it today you would earn a total of 1,578 from holding Nasdaq 100 2x Strategy or generate 2.66% 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. Oil Equipment Services
Performance |
| Timeline |
| Nasdaq 100 2x |
| Oil Equipment Services |
Nasdaq 100 and Oil Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Oil Equipment
The main advantage of trading using opposite Nasdaq 100 and Oil Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Oil Equipment 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 Oil Equipment will offset losses from the drop in Oil Equipment's long position.| Nasdaq 100 vs. Sp 500 2x | Nasdaq 100 vs. Inverse Nasdaq 100 2x | Nasdaq 100 vs. Inverse Sp 500 | Nasdaq 100 vs. Ultra Nasdaq 100 Profunds |
| Oil Equipment vs. Nasdaq 100 2x Strategy | Oil Equipment vs. Nasdaq 100 2x Strategy | Oil Equipment vs. Nasdaq 100 2x Strategy | Oil Equipment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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