Correlation Between Nasdaq-100 Index and Johnson Opportunity
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index and Johnson Opportunity 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 Index and Johnson Opportunity 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 Johnson Opportunity Fund, you can compare the effects of market volatilities on Nasdaq-100 Index and Johnson Opportunity 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 Index with a short position of Johnson Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and Johnson Opportunity.
Diversification Opportunities for Nasdaq-100 Index and Johnson Opportunity
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nasdaq-100 and Johnson is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Johnson Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Opportunity and Nasdaq-100 Index 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 Johnson Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Opportunity has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and Johnson Opportunity go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and Johnson Opportunity
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 0.81 times more return on investment than Johnson Opportunity. However, Nasdaq 100 Index Fund is 1.23 times less risky than Johnson Opportunity. It trades about -0.06 of its potential returns per unit of risk. Johnson Opportunity Fund is currently generating about -0.34 per unit of risk. If you would invest 5,392 in Nasdaq 100 Index Fund on October 9, 2024 and sell it today you would lose (86.00) from holding Nasdaq 100 Index Fund or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. Johnson Opportunity Fund
Performance |
| Timeline |
| Nasdaq 100 Index |
| Johnson Opportunity |
Nasdaq-100 Index and Johnson Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Index and Johnson Opportunity
The main advantage of trading using opposite Nasdaq-100 Index and Johnson Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index position performs unexpectedly, Johnson Opportunity 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 Johnson Opportunity will offset losses from the drop in Johnson Opportunity's long position.| Nasdaq-100 Index vs. Touchstone Large Cap | Nasdaq-100 Index vs. Ab Large Cap | Nasdaq-100 Index vs. Americafirst Large Cap | Nasdaq-100 Index vs. Qs Large Cap |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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