Correlation Between Copeland Risk and Inverse Nasdaq-100

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

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

Diversification Opportunities for Copeland Risk and Inverse Nasdaq-100

-0.93

Correlation Coefficient

Copeland Risk  Inverse Nasdaq-100

Pay attention - limited upside

The 3 months correlation between Copeland and Inverse is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Copeland Risk Managed and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Copeland Risk 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 Copeland Risk Managed are associated (or correlated) with Inverse 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 Inverse Nasdaq 100 has no effect on the direction of Copeland Risk i.e., Copeland Risk and Inverse Nasdaq-100 go up and down completely randomly.

Pair Corralation between Copeland Risk and Inverse Nasdaq-100

Assuming the 90 days horizon Copeland Risk Managed is expected to under-perform the Inverse Nasdaq-100. But the mutual fund apears to be less risky and, when comparing its historical volatility, Copeland Risk Managed is 1.53 times less risky than Inverse Nasdaq-100. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Inverse Nasdaq 100 Strategy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,720  in Inverse Nasdaq 100 Strategy on December 30, 2024 and sell it today you would earn a total of  1,081  from holding Inverse Nasdaq 100 Strategy or generate 10.08% return on investment over 90 days.

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

Copeland Risk Managed  vs.  Inverse Nasdaq 100 Strategy

Copeland Risk Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Copeland Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Copeland Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inverse Nasdaq 100

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Nasdaq 100 Strategy are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Inverse Nasdaq-100 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Copeland Risk and Inverse Nasdaq-100

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

The idea behind Copeland Risk Managed and Inverse Nasdaq 100 Strategy 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.