Correlation Between Nasdaq-100 Index and Science Technology
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index and Science Technology 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 Science Technology 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 Science Technology Fund, you can compare the effects of market volatilities on Nasdaq-100 Index and Science Technology 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 Science Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and Science Technology.
Diversification Opportunities for Nasdaq-100 Index and Science Technology
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NASDAQ-100 and Science is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Science Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Technology 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 Science Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Technology has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and Science Technology go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and Science Technology
Assuming the 90 days horizon Nasdaq-100 Index is expected to generate 1.47 times less return on investment than Science Technology. But when comparing it to its historical volatility, Nasdaq 100 Index Fund is 1.18 times less risky than Science Technology. It trades about 0.1 of its potential returns per unit of risk. Science Technology Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,180 in Science Technology Fund on September 4, 2024 and sell it today you would earn a total of 983.00 from holding Science Technology Fund or generate 45.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. Science Technology Fund
Performance |
| Timeline |
| Nasdaq 100 Index |
| Science Technology |
Nasdaq-100 Index and Science Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Index and Science Technology
The main advantage of trading using opposite Nasdaq-100 Index and Science Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index position performs unexpectedly, Science Technology 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 Science Technology will offset losses from the drop in Science Technology'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 |
| Science Technology vs. Aggressive Growth Fund | Science Technology vs. Sp 500 Index | Science Technology vs. Nasdaq 100 Index Fund | Science Technology vs. International Fund International |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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