Correlation Between Nasdaq 100 and US Dollar
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and US Dollar 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 Nasdaq 100 and US Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 and US Dollar, you can compare the effects of market volatilities on Nasdaq 100 and US Dollar 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 Nasdaq 100 with a short position of US Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and US Dollar.
Diversification Opportunities for Nasdaq 100 and US Dollar
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and DXUSD is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 and US Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Dollar and Nasdaq 100 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 Nasdaq 100 are associated (or correlated) with US Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Dollar has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and US Dollar go up and down completely randomly.
Pair Corralation between Nasdaq 100 and US Dollar
Assuming the 90 days horizon Nasdaq 100 is expected to under-perform the US Dollar. In addition to that, Nasdaq 100 is 3.13 times more volatile than US Dollar. It trades about -0.07 of its total potential returns per unit of risk. US Dollar is currently generating about -0.13 per unit of volatility. If you would invest 10,793 in US Dollar on December 28, 2024 and sell it today you would lose (399.00) from holding US Dollar or give up 3.7% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq 100 vs. US Dollar
Performance |
Timeline |
Nasdaq 100 |
US Dollar |
Nasdaq 100 and US Dollar Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq 100 and US Dollar
The main advantage of trading using opposite Nasdaq 100 and US Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, US Dollar 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 US Dollar will offset losses from the drop in US Dollar's long position.Nasdaq 100 vs. Crude Oil | Nasdaq 100 vs. E Mini SP 500 | Nasdaq 100 vs. Orange Juice | Nasdaq 100 vs. Cotton |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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