Correlation Between Nasdaq-100(r) and New Perspective
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Nasdaq-100(r) and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and New Perspective.
Diversification Opportunities for Nasdaq-100(r) and New Perspective
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq-100(r) and New is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and New Perspective go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and New Perspective
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.51 times more return on investment than New Perspective. However, Nasdaq-100(r) is 2.51 times more volatile than New Perspective Fund. It trades about 0.08 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.03 per unit of risk. If you would invest 48,630 in Nasdaq 100 2x Strategy on November 2, 2024 and sell it today you would earn a total of 8,547 from holding Nasdaq 100 2x Strategy or generate 17.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. New Perspective Fund
Performance |
| Timeline |
| Nasdaq 100 2x |
| New Perspective |
Nasdaq-100(r) and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and New Perspective
The main advantage of trading using opposite Nasdaq-100(r) and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective'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 |
| New Perspective vs. Arrow Dwa Balanced | New Perspective vs. Barings Active Short | New Perspective vs. Nuveen Mid Cap | New Perspective vs. Nasdaq 100 Index 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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