Correlation Between Nasdaq-100 Fund and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Fund and NYSE Composite 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 Fund and NYSE Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Fund Class and NYSE Composite, you can compare the effects of market volatilities on Nasdaq-100 Fund and NYSE Composite 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 Fund with a short position of NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Fund and NYSE Composite.
Diversification Opportunities for Nasdaq-100 Fund and NYSE Composite
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq-100 and NYSE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite and Nasdaq-100 Fund 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 Fund Class are associated (or correlated) with NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and NYSE Composite go up and down completely randomly.
Pair Corralation between Nasdaq-100 Fund and NYSE Composite
Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to generate 1.84 times more return on investment than NYSE Composite. However, Nasdaq-100 Fund is 1.84 times more volatile than NYSE Composite. It trades about -0.04 of its potential returns per unit of risk. NYSE Composite is currently generating about -0.14 per unit of risk. If you would invest 6,765 in Nasdaq 100 Fund Class on February 6, 2024 and sell it today you would lose (84.00) from holding Nasdaq 100 Fund Class or give up 1.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq 100 Fund Class vs. NYSE Composite
Performance |
Timeline |
Nasdaq-100 Fund and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |
Nasdaq 100 Fund Class
Pair trading matchups for Nasdaq-100 Fund
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with Nasdaq-100 Fund and NYSE Composite
The main advantage of trading using opposite Nasdaq-100 Fund and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Fund position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.Nasdaq-100 Fund vs. Nasdaq 100 2x Strategy | Nasdaq-100 Fund vs. Dow 2x Strategy | Nasdaq-100 Fund vs. Select Fund R |
NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. National Beverage Corp | NYSE Composite vs. Tradeweb Markets | NYSE Composite vs. Coty Inc |
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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