Correlation Between 10 Year and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both 10 Year and Nasdaq 100 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 10 Year and Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 10 Year T Note Futures and Nasdaq 100, you can compare the effects of market volatilities on 10 Year and Nasdaq 100 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 10 Year with a short position of Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of 10 Year and Nasdaq 100.
Diversification Opportunities for 10 Year and Nasdaq 100
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ZNUSD and Nasdaq is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding 10 Year T Note Futures and Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 and 10 Year 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 10 Year T Note Futures are associated (or correlated) with Nasdaq 100. 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 has no effect on the direction of 10 Year i.e., 10 Year and Nasdaq 100 go up and down completely randomly.
Pair Corralation between 10 Year and Nasdaq 100
Assuming the 90 days horizon 10 Year T Note Futures is expected to under-perform the Nasdaq 100. But the commodity apears to be less risky and, when comparing its historical volatility, 10 Year T Note Futures is 3.08 times less risky than Nasdaq 100. The commodity trades about -0.03 of its potential returns per unit of risk. The Nasdaq 100 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,743,675 in Nasdaq 100 on August 29, 2024 and sell it today you would earn a total of 355,475 from holding Nasdaq 100 or generate 20.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
10 Year T Note Futures vs. Nasdaq 100
Performance |
| Timeline |
| 10 Year T |
| Nasdaq 100 |
10 Year and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 10 Year and Nasdaq 100
The main advantage of trading using opposite 10 Year and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 10 Year position performs unexpectedly, Nasdaq 100 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 will offset losses from the drop in Nasdaq 100's long position.The idea behind 10 Year T Note Futures and Nasdaq 100 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.| Nasdaq 100 vs. Corn Futures | Nasdaq 100 vs. Five Year Treasury Note | Nasdaq 100 vs. Live Cattle Futures | Nasdaq 100 vs. Lean Hogs Futures |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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