Correlation Between Nasdaq-100(r) and Technology Ultrasector
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Technology Ultrasector 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 Technology Ultrasector 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 Technology Ultrasector Profund, you can compare the effects of market volatilities on Nasdaq-100(r) and Technology Ultrasector 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 Technology Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Technology Ultrasector.
Diversification Opportunities for Nasdaq-100(r) and Technology Ultrasector
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq-100(r) and Technology is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Technology Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Ultrasector 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 Technology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Ultrasector has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Technology Ultrasector go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Technology Ultrasector
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Technology Ultrasector. In addition to that, Nasdaq-100(r) is 1.05 times more volatile than Technology Ultrasector Profund. It trades about -0.09 of its total potential returns per unit of risk. Technology Ultrasector Profund is currently generating about -0.06 per unit of volatility. If you would invest 3,663 in Technology Ultrasector Profund on November 29, 2024 and sell it today you would lose (83.00) from holding Technology Ultrasector Profund or give up 2.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Technology Ultrasector Profund
Performance |
| Timeline |
| Nasdaq 100 2x |
| Technology Ultrasector |
Nasdaq-100(r) and Technology Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Technology Ultrasector
The main advantage of trading using opposite Nasdaq-100(r) and Technology Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Technology Ultrasector 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 Technology Ultrasector will offset losses from the drop in Technology Ultrasector'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 |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |