Correlation Between Small Cap and Short Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Small Cap and Short 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 and Short 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 Value Profund and Short Nasdaq 100 Profund, you can compare the effects of market volatilities on Small Cap and Short 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 with a short position of Short Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Short Nasdaq-100.
Diversification Opportunities for Small Cap and Short Nasdaq-100
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Small and Short is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Short Nasdaq 100 Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Nasdaq 100 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 Value Profund are associated (or correlated) with Short 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 Short Nasdaq 100 has no effect on the direction of Small Cap i.e., Small Cap and Short Nasdaq-100 go up and down completely randomly.
Pair Corralation between Small Cap and Short Nasdaq-100
Assuming the 90 days horizon Small Cap Value Profund is expected to under-perform the Short Nasdaq-100. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Value Profund is 2.22 times less risky than Short Nasdaq-100. The mutual fund trades about -0.33 of its potential returns per unit of risk. The Short Nasdaq 100 Profund is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 3,761 in Short Nasdaq 100 Profund on October 15, 2024 and sell it today you would lose (210.00) from holding Short Nasdaq 100 Profund or give up 5.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Profund vs. Short Nasdaq 100 Profund
Performance |
| Timeline |
| Small Cap Value |
| Short Nasdaq 100 |
Small Cap and Short Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Short Nasdaq-100
The main advantage of trading using opposite Small Cap and Short Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Short 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 Short Nasdaq-100 will offset losses from the drop in Short Nasdaq-100's long position.| Small Cap vs. Touchstone Small Cap | Small Cap vs. Ab Small Cap | Small Cap vs. Glg Intl Small | Small Cap vs. Tax Managed Mid Small |
| Short Nasdaq-100 vs. Mfs Technology Fund | Short Nasdaq-100 vs. Invesco Technology Fund | Short Nasdaq-100 vs. Towpath Technology | Short Nasdaq-100 vs. Firsthand Technology Opportunities |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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