Correlation Between IncomeShares SP500 and IncomeShares Nasdaq

Can any of the company-specific risk be diversified away by investing in both IncomeShares SP500 and IncomeShares Nasdaq 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 IncomeShares SP500 and IncomeShares Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IncomeShares SP500 Options and IncomeShares Nasdaq 100, you can compare the effects of market volatilities on IncomeShares SP500 and IncomeShares Nasdaq 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 IncomeShares SP500 with a short position of IncomeShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of IncomeShares SP500 and IncomeShares Nasdaq.

Diversification Opportunities for IncomeShares SP500 and IncomeShares Nasdaq

0.86

Correlation Coefficient

IncomeShares SP500  IncomeShares Nasdaq

Very poor diversification

The 3 months correlation between IncomeShares and IncomeShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding IncomeShares SP500 Options and IncomeShares Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Nasdaq 100 and IncomeShares SP500 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 IncomeShares SP500 Options are associated (or correlated) with IncomeShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Nasdaq 100 has no effect on the direction of IncomeShares SP500 i.e., IncomeShares SP500 and IncomeShares Nasdaq go up and down completely randomly.

Pair Corralation between IncomeShares SP500 and IncomeShares Nasdaq

Assuming the 90 days trading horizon IncomeShares SP500 Options is expected to generate 0.76 times more return on investment than IncomeShares Nasdaq. However, IncomeShares SP500 Options is 1.31 times less risky than IncomeShares Nasdaq. It trades about 0.05 of its potential returns per unit of risk. IncomeShares Nasdaq 100 is currently generating about -0.02 per unit of risk. If you would invest  860.00  in IncomeShares SP500 Options on October 10, 2024 and sell it today you would earn a total of  10.00  from holding IncomeShares SP500 Options or generate 1.16% return on investment over 90 days.

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

IncomeShares SP500 Options  vs.  IncomeShares Nasdaq 100

IncomeShares SP500

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares SP500 Options are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IncomeShares SP500 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

IncomeShares Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IncomeShares Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IncomeShares Nasdaq is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IncomeShares SP500 and IncomeShares Nasdaq

The main advantage of trading using opposite IncomeShares SP500 and IncomeShares Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IncomeShares SP500 position performs unexpectedly, IncomeShares Nasdaq 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 IncomeShares Nasdaq will offset losses from the drop in IncomeShares Nasdaq's long position.

The idea behind IncomeShares SP500 Options and IncomeShares Nasdaq 100 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.