Correlation Between Nasdaq-100 Index and World Growth
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index and World Growth 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 World Growth 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 World Growth Fund, you can compare the effects of market volatilities on Nasdaq-100 Index and World Growth 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 World Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and World Growth.
Diversification Opportunities for Nasdaq-100 Index and World Growth
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nasdaq-100 and World is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and World Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Growth 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 World Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Growth has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and World Growth go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and World Growth
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 1.4 times more return on investment than World Growth. However, Nasdaq-100 Index is 1.4 times more volatile than World Growth Fund. It trades about 0.1 of its potential returns per unit of risk. World Growth Fund is currently generating about 0.08 per unit of risk. If you would invest 3,166 in Nasdaq 100 Index Fund on November 2, 2024 and sell it today you would earn a total of 2,123 from holding Nasdaq 100 Index Fund or generate 67.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. World Growth Fund
Performance |
| Timeline |
| Nasdaq 100 Index |
| World Growth |
Nasdaq-100 Index and World Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Index and World Growth
The main advantage of trading using opposite Nasdaq-100 Index and World Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index position performs unexpectedly, World Growth 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 World Growth will offset losses from the drop in World Growth's long position.| Nasdaq-100 Index vs. Sp 500 Index | Nasdaq-100 Index vs. Science Technology Fund | Nasdaq-100 Index vs. Extended Market Index | Nasdaq-100 Index vs. World Growth Fund |
| World Growth vs. International Fund International | World Growth vs. Emerging Markets Fund | World Growth vs. Science Technology Fund | World Growth vs. Aggressive Growth 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |