Correlation Between IncomeShares Nasdaq and IncomeShares SP500

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

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

Diversification Opportunities for IncomeShares Nasdaq and IncomeShares SP500

0.44

Correlation Coefficient

IncomeShares Nasdaq  IncomeShares SP500

Very weak diversification

The 3 months correlation between IncomeShares and IncomeShares is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding IncomeShares Nasdaq 100 and IncomeShares SP500 Options in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares SP500 and IncomeShares Nasdaq 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 Nasdaq 100 are associated (or correlated) with IncomeShares SP500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares SP500 has no effect on the direction of IncomeShares Nasdaq i.e., IncomeShares Nasdaq and IncomeShares SP500 go up and down completely randomly.

Pair Corralation between IncomeShares Nasdaq and IncomeShares SP500

Assuming the 90 days trading horizon IncomeShares Nasdaq is expected to generate 1.26 times less return on investment than IncomeShares SP500. In addition to that, IncomeShares Nasdaq is 1.17 times more volatile than IncomeShares SP500 Options. It trades about 0.07 of its total potential returns per unit of risk. IncomeShares SP500 Options is currently generating about 0.11 per unit of volatility. If you would invest  861.00  in IncomeShares SP500 Options on October 25, 2024 and sell it today you would earn a total of  11.00  from holding IncomeShares SP500 Options or generate 1.28% return on investment over 90 days.

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

IncomeShares Nasdaq 100  vs.  IncomeShares SP500 Options

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.

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.

Pair Trading with IncomeShares Nasdaq and IncomeShares SP500

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

The idea behind IncomeShares Nasdaq 100 and IncomeShares SP500 Options 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.