Correlation Between Income Stock and Nasdaq-100 Index
Can any of the company-specific risk be diversified away by investing in both Income Stock and Nasdaq-100 Index 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 Income Stock and Nasdaq-100 Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Stock Fund and Nasdaq 100 Index Fund, you can compare the effects of market volatilities on Income Stock and Nasdaq-100 Index 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 Income Stock with a short position of Nasdaq-100 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Stock and Nasdaq-100 Index.
Diversification Opportunities for Income Stock and Nasdaq-100 Index
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Income and Nasdaq-100 is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Nasdaq 100 Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Index and Income Stock 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 Income Stock Fund are associated (or correlated) with Nasdaq-100 Index. 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 Index has no effect on the direction of Income Stock i.e., Income Stock and Nasdaq-100 Index go up and down completely randomly.
Pair Corralation between Income Stock and Nasdaq-100 Index
Assuming the 90 days horizon Income Stock Fund is expected to generate 0.61 times more return on investment than Nasdaq-100 Index. However, Income Stock Fund is 1.65 times less risky than Nasdaq-100 Index. It trades about 0.14 of its potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about 0.08 per unit of risk. If you would invest 1,924 in Income Stock Fund on August 28, 2024 and sell it today you would earn a total of 270.00 from holding Income Stock Fund or generate 14.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Stock Fund vs. Nasdaq 100 Index Fund
Performance |
| Timeline |
| Income Stock |
| Nasdaq 100 Index |
Income Stock and Nasdaq-100 Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Stock and Nasdaq-100 Index
The main advantage of trading using opposite Income Stock and Nasdaq-100 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Stock position performs unexpectedly, Nasdaq-100 Index 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 Index will offset losses from the drop in Nasdaq-100 Index's long position.| Income Stock vs. Capital Growth Fund | Income Stock vs. Emerging Markets Fund | Income Stock vs. High Income Fund | Income Stock vs. International Fund International |
| Nasdaq-100 Index vs. Sprott Gold Equity | Nasdaq-100 Index vs. Franklin Gold Precious | Nasdaq-100 Index vs. Fidelity Advisor Gold | Nasdaq-100 Index vs. Short Precious Metals |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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