Correlation Between Nasdaq 100 and Government Securities
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Government Securities 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 Government Securities 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 Government Securities Fund, you can compare the effects of market volatilities on Nasdaq 100 and Government Securities 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 Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Government Securities.
Diversification Opportunities for Nasdaq 100 and Government Securities
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nasdaq and Government is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Government Securities go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Government Securities
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 3.32 times more return on investment than Government Securities. However, Nasdaq 100 is 3.32 times more volatile than Government Securities Fund. It trades about 0.1 of its potential returns per unit of risk. Government Securities Fund is currently generating about 0.04 per unit of risk. If you would invest 3,077 in Nasdaq 100 Index Fund on September 2, 2024 and sell it today you would earn a total of 2,185 from holding Nasdaq 100 Index Fund or generate 71.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. Government Securities Fund
Performance |
| Timeline |
| Nasdaq 100 Index |
| Government Securities |
Nasdaq 100 and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Government Securities
The main advantage of trading using opposite Nasdaq 100 and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' long position.| Nasdaq 100 vs. Pimco Global Multi Asset | Nasdaq 100 vs. Commonwealth Global Fund | Nasdaq 100 vs. Mirova Global Green | Nasdaq 100 vs. T Rowe Price |
| Government Securities vs. Capital Growth Fund | Government Securities vs. High Income Fund | Government Securities vs. International Fund International | Government Securities vs. Growth Income Fund |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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