Correlation Between Nasdaq 100 and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Sp Smallcap 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 Smallcap 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 Smallcap 600, you can compare the effects of market volatilities on Nasdaq 100 and Sp Smallcap 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 Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Sp Smallcap.
Diversification Opportunities for Nasdaq 100 and Sp Smallcap
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and RYSVX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 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 Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Sp Smallcap go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Sp Smallcap
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Sp Smallcap. In addition to that, Nasdaq 100 is 2.49 times more volatile than Sp Smallcap 600. It trades about -0.11 of its total potential returns per unit of risk. Sp Smallcap 600 is currently generating about -0.22 per unit of volatility. If you would invest 21,882 in Sp Smallcap 600 on October 9, 2024 and sell it today you would lose (1,080) from holding Sp Smallcap 600 or give up 4.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Sp Smallcap 600
Performance |
| Timeline |
| Nasdaq 100 2x |
| Sp Smallcap 600 |
Nasdaq 100 and Sp Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Sp Smallcap
The main advantage of trading using opposite Nasdaq 100 and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Sp Smallcap 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 Smallcap will offset losses from the drop in Sp Smallcap'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 Smallcap vs. Fidelity California Municipal | Sp Smallcap vs. Transamerica Intermediate Muni | Sp Smallcap vs. Blackrock Pa Muni | Sp Smallcap vs. American High Income Municipal |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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