Correlation Between Nasdaq 100 and Vanguard Target
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Vanguard Target 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 Vanguard Target 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 Vanguard Target Retirement, you can compare the effects of market volatilities on Nasdaq 100 and Vanguard Target 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 Vanguard Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Vanguard Target.
Diversification Opportunities for Nasdaq 100 and Vanguard Target
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Vanguard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti 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 Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Vanguard Target go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Vanguard Target
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 4.65 times more return on investment than Vanguard Target. However, Nasdaq 100 is 4.65 times more volatile than Vanguard Target Retirement. It trades about 0.08 of its potential returns per unit of risk. Vanguard Target Retirement is currently generating about 0.11 per unit of risk. If you would invest 42,071 in Nasdaq 100 2x Strategy on August 28, 2024 and sell it today you would earn a total of 15,187 from holding Nasdaq 100 2x Strategy or generate 36.1% 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. Vanguard Target Retirement
Performance |
| Timeline |
| Nasdaq 100 2x |
| Vanguard Target Reti |
Nasdaq 100 and Vanguard Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Vanguard Target
The main advantage of trading using opposite Nasdaq 100 and Vanguard Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Vanguard Target 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 Vanguard Target will offset losses from the drop in Vanguard Target's long position.The idea behind Nasdaq 100 2x Strategy and Vanguard Target Retirement pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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