Correlation Between Nasdaq 100 and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy Fund, you can compare the effects of market volatilities on Nasdaq 100 and Balanced Strategy 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 Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Balanced Strategy.
Diversification Opportunities for Nasdaq 100 and Balanced Strategy
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Balanced is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Balanced Strategy go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Balanced Strategy
Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.99 times less return on investment than Balanced Strategy. In addition to that, Nasdaq 100 is 4.76 times more volatile than Balanced Strategy Fund. It trades about 0.02 of its total potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.23 per unit of volatility. If you would invest 1,024 in Balanced Strategy Fund on November 4, 2024 and sell it today you would earn a total of 24.00 from holding Balanced Strategy Fund or generate 2.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Balanced Strategy Fund
Performance |
| Timeline |
| Nasdaq 100 2x |
| Balanced Strategy |
Nasdaq 100 and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Balanced Strategy
The main advantage of trading using opposite Nasdaq 100 and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Balanced Strategy 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 Balanced Strategy will offset losses from the drop in Balanced Strategy'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 |
| Balanced Strategy vs. Ashmore Emerging Markets | Balanced Strategy vs. Barings Emerging Markets | Balanced Strategy vs. Siit Emerging Markets | Balanced Strategy vs. Artisan Developing World |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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