Correlation Between World Energy and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both World Energy and Nasdaq-100(r) 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 World Energy and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on World Energy and Nasdaq-100(r) 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 World Energy with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Nasdaq-100(r).
Diversification Opportunities for World Energy and Nasdaq-100(r)
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between World and Nasdaq-100(r) is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and World Energy 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 World Energy Fund are associated (or correlated) with Nasdaq-100(r). 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 2x has no effect on the direction of World Energy i.e., World Energy and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between World Energy and Nasdaq-100(r)
Assuming the 90 days horizon World Energy Fund is expected to generate 0.49 times more return on investment than Nasdaq-100(r). However, World Energy Fund is 2.05 times less risky than Nasdaq-100(r). It trades about 0.09 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.01 per unit of risk. If you would invest 1,417 in World Energy Fund on October 10, 2024 and sell it today you would earn a total of 94.00 from holding World Energy Fund or generate 6.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
World Energy Fund vs. Nasdaq 100 2x Strategy
Performance |
Timeline |
World Energy |
Nasdaq 100 2x |
World Energy and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with World Energy and Nasdaq-100(r)
The main advantage of trading using opposite World Energy and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Nasdaq-100(r) 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(r) will offset losses from the drop in Nasdaq-100(r)'s long position.World Energy vs. Black Oak Emerging | World Energy vs. Nasdaq 100 2x Strategy | World Energy vs. Balanced Strategy Fund | World Energy vs. Mid Cap 15x Strategy |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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