Correlation Between Century Small and Nasdaq-100 Index
Can any of the company-specific risk be diversified away by investing in both Century Small and Nasdaq-100 Index 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 Century Small and Nasdaq-100 Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Small Cap and Nasdaq 100 Index Fund, you can compare the effects of market volatilities on Century Small and Nasdaq-100 Index 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 Century Small with a short position of Nasdaq-100 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Small and Nasdaq-100 Index.
Diversification Opportunities for Century Small and Nasdaq-100 Index
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Century and Nasdaq-100 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Century Small Cap and Nasdaq 100 Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Index and Century Small 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 Century Small Cap are associated (or correlated) with Nasdaq-100 Index. 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 Index has no effect on the direction of Century Small i.e., Century Small and Nasdaq-100 Index go up and down completely randomly.
Pair Corralation between Century Small and Nasdaq-100 Index
Assuming the 90 days horizon Century Small Cap is expected to generate 1.09 times more return on investment than Nasdaq-100 Index. However, Century Small is 1.09 times more volatile than Nasdaq 100 Index Fund. It trades about 0.08 of its potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about 0.08 per unit of risk. If you would invest 2,909 in Century Small Cap on December 3, 2024 and sell it today you would earn a total of 939.00 from holding Century Small Cap or generate 32.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Century Small Cap vs. Nasdaq 100 Index Fund
Performance |
Timeline |
Century Small Cap |
Nasdaq 100 Index |
Century Small and Nasdaq-100 Index Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Century Small and Nasdaq-100 Index
The main advantage of trading using opposite Century Small and Nasdaq-100 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Small position performs unexpectedly, Nasdaq-100 Index 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 Index will offset losses from the drop in Nasdaq-100 Index's long position.Century Small vs. Third Avenue Real | Century Small vs. Aegis Value Fund | Century Small vs. Litman Gregory Masters | Century Small vs. Marsico Growth Fund |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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