Correlation Between Small Cap and Nasdaq-100 Profund
Can any of the company-specific risk be diversified away by investing in both Small Cap and Nasdaq-100 Profund 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 and Nasdaq-100 Profund 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 and Nasdaq-100 Profund 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 with a short position of Nasdaq-100 Profund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Nasdaq-100 Profund.
Diversification Opportunities for Small Cap and Nasdaq-100 Profund
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Small and Nasdaq-100 is 0.32. 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 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 Profund. 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 i.e., Small Cap and Nasdaq-100 Profund go up and down completely randomly.
Pair Corralation between Small Cap and Nasdaq-100 Profund
Assuming the 90 days horizon Small Cap is expected to generate 3.11 times less return on investment than Nasdaq-100 Profund. In addition to that, Small Cap is 1.05 times more volatile than Nasdaq 100 Profund Nasdaq 100. It trades about 0.03 of its total potential returns per unit of risk. Nasdaq 100 Profund Nasdaq 100 is currently generating about 0.1 per unit of volatility. If you would invest 2,618 in Nasdaq 100 Profund Nasdaq 100 on October 14, 2024 and sell it today you would earn a total of 1,895 from holding Nasdaq 100 Profund Nasdaq 100 or generate 72.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| 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 and Nasdaq-100 Profund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Nasdaq-100 Profund
The main advantage of trading using opposite Small Cap and Nasdaq-100 Profund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Nasdaq-100 Profund 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 Profund will offset losses from the drop in Nasdaq-100 Profund's long position.| Small Cap vs. Small Cap Value Profund | Small Cap vs. Mid Cap Growth Profund | Small Cap vs. Mid Cap Value Profund | Small Cap vs. Small Cap Profund Small Cap |
| Nasdaq-100 Profund vs. Bull Profund Investor | Nasdaq-100 Profund vs. Small Cap Profund Small Cap | Nasdaq-100 Profund vs. Mid Cap Profund Mid Cap | Nasdaq-100 Profund 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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