Correlation Between NEOS ETF and NEOS Nasdaq

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

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

Diversification Opportunities for NEOS ETF and NEOS Nasdaq

-0.65

Correlation Coefficient

NEOS ETF  NEOS Nasdaq

Excellent diversification

The 3 months correlation between NEOS and NEOS is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NEOS ETF Trust and NEOS Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEOS Nasdaq 100 and NEOS ETF 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 NEOS ETF Trust are associated (or correlated) with NEOS Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEOS Nasdaq 100 has no effect on the direction of NEOS ETF i.e., NEOS ETF and NEOS Nasdaq go up and down completely randomly.

Pair Corralation between NEOS ETF and NEOS Nasdaq

Given the investment horizon of 90 days NEOS ETF Trust is expected to generate 11.2 times more return on investment than NEOS Nasdaq. However, NEOS ETF is 11.2 times more volatile than NEOS Nasdaq 100. It trades about 0.13 of its potential returns per unit of risk. NEOS Nasdaq 100 is currently generating about -0.07 per unit of risk. If you would invest  2,614  in NEOS ETF Trust on December 27, 2024 and sell it today you would earn a total of  2,384  from holding NEOS ETF Trust or generate 91.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.8%
Values	Daily Returns

NEOS ETF Trust  vs.  NEOS Nasdaq 100

NEOS ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEOS ETF Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, NEOS ETF demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NEOS Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEOS Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, NEOS Nasdaq is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NEOS ETF and NEOS Nasdaq

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

The idea behind NEOS ETF Trust and NEOS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.