Correlation Between Nasdaq-100 Profund and Biotechnology Ultrasector

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Profund and Biotechnology Ultrasector 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 Profund and Biotechnology Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 Profund Nasdaq 100 and Biotechnology Ultrasector Profund, you can compare the effects of market volatilities on Nasdaq-100 Profund and Biotechnology Ultrasector 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 Profund with a short position of Biotechnology Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Profund and Biotechnology Ultrasector.

Diversification Opportunities for Nasdaq-100 Profund and Biotechnology Ultrasector

0.88

Correlation Coefficient

Nasdaq-100 Profund  Biotechnology Ultrasector

Very poor diversification

The 3 months correlation between Nasdaq-100 and Biotechnology is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Profund Nasdaq 100 and Biotechnology Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Ultrasector and Nasdaq-100 Profund 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 Profund Nasdaq 100 are associated (or correlated) with Biotechnology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Ultrasector has no effect on the direction of Nasdaq-100 Profund i.e., Nasdaq-100 Profund and Biotechnology Ultrasector go up and down completely randomly.

Pair Corralation between Nasdaq-100 Profund and Biotechnology Ultrasector

Assuming the 90 days horizon Nasdaq 100 Profund Nasdaq 100 is expected to generate 0.68 times more return on investment than Biotechnology Ultrasector. However, Nasdaq 100 Profund Nasdaq 100 is 1.47 times less risky than Biotechnology Ultrasector. It trades about -0.05 of its potential returns per unit of risk. Biotechnology Ultrasector Profund is currently generating about -0.11 per unit of risk. If you would invest  3,558  in Nasdaq 100 Profund Nasdaq 100 on February 10, 2025 and sell it today you would lose (312.00) from holding Nasdaq 100 Profund Nasdaq 100 or give up 8.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Nasdaq 100 Profund Nasdaq 100  vs.  Biotechnology Ultrasector Prof

Nasdaq 100 Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 Profund Nasdaq 100 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Biotechnology Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biotechnology Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Nasdaq-100 Profund and Biotechnology Ultrasector

The main advantage of trading using opposite Nasdaq-100 Profund and Biotechnology Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Profund position performs unexpectedly, Biotechnology Ultrasector 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 Biotechnology Ultrasector will offset losses from the drop in Biotechnology Ultrasector's long position.

The idea behind Nasdaq 100 Profund Nasdaq 100 and Biotechnology Ultrasector Profund 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.