Correlation Between Small-cap Value and Nasdaq-100 Profund
Can any of the company-specific risk be diversified away by investing in both Small-cap Value 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 Value 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 Value Profund and Nasdaq 100 Profund Nasdaq 100, you can compare the effects of market volatilities on Small-cap Value 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 Value with a short position of Nasdaq-100 Profund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Nasdaq-100 Profund.
Diversification Opportunities for Small-cap Value and Nasdaq-100 Profund
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small-cap and Nasdaq-100 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value 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 Value 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 Value 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 Value i.e., Small-cap Value and Nasdaq-100 Profund go up and down completely randomly.
Pair Corralation between Small-cap Value and Nasdaq-100 Profund
Assuming the 90 days horizon Small Cap Value Profund is expected to generate 1.48 times more return on investment than Nasdaq-100 Profund. However, Small-cap Value is 1.48 times more volatile than Nasdaq 100 Profund Nasdaq 100. It trades about 0.23 of its potential returns per unit of risk. Nasdaq 100 Profund Nasdaq 100 is currently generating about 0.03 per unit of risk. If you would invest 8,534 in Small Cap Value Profund on August 30, 2024 and sell it today you would earn a total of 746.00 from holding Small Cap Value Profund or generate 8.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Profund vs. Nasdaq 100 Profund Nasdaq 100
Performance |
| Timeline |
| Small Cap Value |
| Nasdaq 100 Profund |
Small-cap Value and Nasdaq-100 Profund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Nasdaq-100 Profund
The main advantage of trading using opposite Small-cap Value and Nasdaq-100 Profund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value 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 Value vs. Short Real Estate | Small-cap Value vs. Short Real Estate | Small-cap Value vs. Ultrashort Mid Cap Profund | Small-cap Value vs. Ultrashort Mid Cap 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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