Correlation Between World Growth and Nasdaq-100 Index

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Can any of the company-specific risk be diversified away by investing in both World Growth 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 World Growth 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 World Growth Fund and Nasdaq 100 Index Fund, you can compare the effects of market volatilities on World Growth 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 World Growth with a short position of Nasdaq-100 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Growth and Nasdaq-100 Index.

Diversification Opportunities for World Growth and Nasdaq-100 Index

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between World and Nasdaq-100 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding World Growth 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 World Growth 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 World Growth 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 World Growth i.e., World Growth and Nasdaq-100 Index go up and down completely randomly.

Pair Corralation between World Growth and Nasdaq-100 Index

Assuming the 90 days horizon World Growth Fund is expected to generate 0.68 times more return on investment than Nasdaq-100 Index. However, World Growth Fund is 1.47 times less risky than Nasdaq-100 Index. It trades about 0.15 of its potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about 0.1 per unit of risk. If you would invest  2,951  in World Growth Fund on November 3, 2024 and sell it today you would earn a total of  77.00  from holding World Growth Fund or generate 2.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

World Growth Fund  vs.  Nasdaq 100 Index Fund

 Performance 
       Timeline  
World Growth 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days World Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, World Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Nasdaq 100 Index 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Index Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100 Index may actually be approaching a critical reversion point that can send shares even higher in March 2025.

World Growth and Nasdaq-100 Index Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with World Growth and Nasdaq-100 Index

The main advantage of trading using opposite World Growth and Nasdaq-100 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Growth 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.
The idea behind World Growth Fund and Nasdaq 100 Index Fund 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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