Correlation Between Small-cap Growth and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both Small-cap Growth and Nasdaq 100 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 Small-cap Growth and Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth Profund and Nasdaq 100 Profund Nasdaq 100, you can compare the effects of market volatilities on Small-cap Growth and Nasdaq 100 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 Small-cap Growth with a short position of Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Growth and Nasdaq 100.
Diversification Opportunities for Small-cap Growth and Nasdaq 100
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small-cap and Nasdaq is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth Profund and Nasdaq 100 Profund Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Profund and Small-cap Growth 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 Small Cap Growth Profund are associated (or correlated) with Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Profund has no effect on the direction of Small-cap Growth i.e., Small-cap Growth and Nasdaq 100 go up and down completely randomly.
Pair Corralation between Small-cap Growth and Nasdaq 100
Assuming the 90 days horizon Small Cap Growth Profund is expected to generate 1.47 times more return on investment than Nasdaq 100. However, Small-cap Growth is 1.47 times more volatile than Nasdaq 100 Profund Nasdaq 100. It trades about 0.24 of its potential returns per unit of risk. Nasdaq 100 Profund Nasdaq 100 is currently generating about 0.07 per unit of risk. If you would invest 11,266 in Small Cap Growth Profund on August 31, 2024 and sell it today you would earn a total of 991.00 from holding Small Cap Growth Profund or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth Profund vs. Nasdaq 100 Profund Nasdaq 100
Performance |
| Timeline |
| Small Cap Growth |
| Nasdaq 100 Profund |
Small-cap Growth and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Growth and Nasdaq 100
The main advantage of trading using opposite Small-cap Growth and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Growth position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.| Small-cap Growth vs. Small Cap Value Profund | Small-cap Growth vs. Mid Cap Growth Profund | Small-cap Growth vs. Mid Cap Value Profund | Small-cap Growth vs. Small Cap Profund Small Cap |
| Nasdaq 100 vs. Bull Profund Investor | Nasdaq 100 vs. Small Cap Profund Small Cap | Nasdaq 100 vs. Mid Cap Profund Mid Cap | Nasdaq 100 vs. Small Cap Growth Profund |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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