Correlation Between Nasdaq 100 and Ab Select

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Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Ab Select 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 Nasdaq 100 and Ab Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Index Fund and Ab Select Longshort, you can compare the effects of market volatilities on Nasdaq 100 and Ab Select 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 Nasdaq 100 with a short position of Ab Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Ab Select.

Diversification Opportunities for Nasdaq 100 and Ab Select

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Nasdaq and ASLKX is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Ab Select Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Select Longshort and Nasdaq 100 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 Nasdaq 100 Index Fund are associated (or correlated) with Ab Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Select Longshort has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Ab Select go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Ab Select

Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 2.66 times more return on investment than Ab Select. However, Nasdaq 100 is 2.66 times more volatile than Ab Select Longshort. It trades about 0.09 of its potential returns per unit of risk. Ab Select Longshort is currently generating about 0.16 per unit of risk. If you would invest  3,952  in Nasdaq 100 Index Fund on August 29, 2024 and sell it today you would earn a total of  1,263  from holding Nasdaq 100 Index Fund or generate 31.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy61.22%
ValuesDaily Returns

Nasdaq 100 Index Fund  vs.  Ab Select Longshort

 Performance 
       Timeline  
Nasdaq 100 Index 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Index Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq 100 may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Ab Select Longshort 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ab Select Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Ab Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nasdaq 100 and Ab Select Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nasdaq 100 and Ab Select

The main advantage of trading using opposite Nasdaq 100 and Ab Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Ab Select 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 Ab Select will offset losses from the drop in Ab Select's long position.
The idea behind Nasdaq 100 Index Fund and Ab Select Longshort pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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