Correlation Between Inverse Nasdaq-100 and Sp 500
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Sp 500 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 Inverse Nasdaq-100 and Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Nasdaq 100 Strategy and Sp 500 Pure, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Sp 500 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 Inverse Nasdaq-100 with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Sp 500.
Diversification Opportunities for Inverse Nasdaq-100 and Sp 500
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Inverse and RYZAX is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Sp 500 Pure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Pure and Inverse Nasdaq-100 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 Inverse Nasdaq 100 Strategy are associated (or correlated) with Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Pure has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Sp 500 go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Sp 500
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to generate 1.35 times more return on investment than Sp 500. However, Inverse Nasdaq-100 is 1.35 times more volatile than Sp 500 Pure. It trades about 0.02 of its potential returns per unit of risk. Sp 500 Pure is currently generating about -0.12 per unit of risk. If you would invest 1,647 in Inverse Nasdaq 100 Strategy on February 4, 2024 and sell it today you would earn a total of 6.00 from holding Inverse Nasdaq 100 Strategy or generate 0.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Sp 500 Pure
Performance |
Timeline |
Inverse Nasdaq 100 |
Sp 500 Pure |
Inverse Nasdaq-100 and Sp 500 Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse Nasdaq-100 and Sp 500
The main advantage of trading using opposite Inverse Nasdaq-100 and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.Inverse Nasdaq-100 vs. Basic Materials Fund | Inverse Nasdaq-100 vs. Basic Materials Fund | Inverse Nasdaq-100 vs. Banking Fund Class | Inverse Nasdaq-100 vs. Basic Materials 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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