Correlation Between Matson Money and Nasdaq-100(r)

Can any of the company-specific risk be diversified away by investing in both Matson Money 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 Matson Money 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 Matson Money Equity and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Matson Money 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 Matson Money with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Matson Money and Nasdaq-100(r).

Diversification Opportunities for Matson Money and Nasdaq-100(r)

0.64

Correlation Coefficient

Matson Money  Nasdaq-100(r)

Poor diversification

The 3 months correlation between Matson and Nasdaq-100(r) is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Matson Money Equity 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 Matson Money 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 Matson Money Equity 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 Matson Money i.e., Matson Money and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Matson Money and Nasdaq-100(r)

Assuming the 90 days horizon Matson Money is expected to generate 7.83 times less return on investment than Nasdaq-100(r). But when comparing it to its historical volatility, Matson Money Equity is 2.1 times less risky than Nasdaq-100(r). It trades about 0.02 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,140  in Nasdaq 100 2x Strategy on October 12, 2024 and sell it today you would earn a total of  21,867  from holding Nasdaq 100 2x Strategy or generate 135.48% return on investment over 90 days.

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

Matson Money Equity  vs.  Nasdaq 100 2x Strategy

Matson Money Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matson Money Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Nasdaq 100 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Nasdaq-100(r) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matson Money and Nasdaq-100(r)

The main advantage of trading using opposite Matson Money and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matson Money 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.

The idea behind Matson Money Equity and Nasdaq 100 2x 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.