Correlation Between Nasdaq-100(r) and Q3 All-weather
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Q3 All-weather 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 Q3 All-weather 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 Q3 All Weather Tactical, you can compare the effects of market volatilities on Nasdaq-100(r) and Q3 All-weather 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 Q3 All-weather. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Q3 All-weather.
Diversification Opportunities for Nasdaq-100(r) and Q3 All-weather
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq-100(r) and QAITX is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Q3 All Weather Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q3 All Weather 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 Q3 All-weather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q3 All Weather has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Q3 All-weather go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Q3 All-weather
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.4 times more return on investment than Q3 All-weather. However, Nasdaq-100(r) is 2.4 times more volatile than Q3 All Weather Tactical. It trades about 0.07 of its potential returns per unit of risk. Q3 All Weather Tactical is currently generating about -0.03 per unit of risk. If you would invest 55,476 in Nasdaq 100 2x Strategy on August 31, 2024 and sell it today you would earn a total of 1,574 from holding Nasdaq 100 2x Strategy or generate 2.84% 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. Q3 All Weather Tactical
Performance |
| Timeline |
| Nasdaq 100 2x |
| Q3 All Weather |
Nasdaq-100(r) and Q3 All-weather Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Q3 All-weather
The main advantage of trading using opposite Nasdaq-100(r) and Q3 All-weather positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Q3 All-weather 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 Q3 All-weather will offset losses from the drop in Q3 All-weather'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 |
| Q3 All-weather vs. Highland Longshort Healthcare | Q3 All-weather vs. The Gabelli Healthcare | Q3 All-weather vs. Health Care Fund | Q3 All-weather vs. Delaware Healthcare Fund |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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