Correlation Between Nasdaq 100 and Sp 500
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Sp 500 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 Sp 500 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 Sp 500 2x, you can compare the effects of market volatilities on Nasdaq 100 and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Sp 500.
Diversification Opportunities for Nasdaq 100 and Sp 500
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq and RYCTX is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Sp 500 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 2x 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 Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 2x has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Sp 500 go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Sp 500
Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.12 times less return on investment than Sp 500. In addition to that, Nasdaq 100 is 1.67 times more volatile than Sp 500 2x. It trades about 0.07 of its total potential returns per unit of risk. Sp 500 2x is currently generating about 0.14 per unit of volatility. If you would invest 28,919 in Sp 500 2x on September 13, 2024 and sell it today you would earn a total of 848.00 from holding Sp 500 2x or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Sp 500 2x
Performance |
| Timeline |
| Nasdaq 100 2x |
| Sp 500 2x |
Nasdaq 100 and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Sp 500
The main advantage of trading using opposite Nasdaq 100 and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500'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 |
| Sp 500 vs. Basic Materials Fund | Sp 500 vs. Basic Materials Fund | Sp 500 vs. Banking Fund Class | Sp 500 vs. Basic Materials 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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