Correlation Between Inverse Nasdaq and Inverse High
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq and Inverse High 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 Inverse Nasdaq and Inverse High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Nasdaq 100 Strategy and Inverse High Yield, you can compare the effects of market volatilities on Inverse Nasdaq and Inverse High 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 Inverse Nasdaq with a short position of Inverse High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq and Inverse High.
Diversification Opportunities for Inverse Nasdaq and Inverse High
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Inverse and Inverse is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Inverse High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse High Yield and Inverse 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 Inverse Nasdaq 100 Strategy are associated (or correlated) with Inverse High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse High Yield has no effect on the direction of Inverse Nasdaq i.e., Inverse Nasdaq and Inverse High go up and down completely randomly.
Pair Corralation between Inverse Nasdaq and Inverse High
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Inverse High. In addition to that, Inverse Nasdaq is 3.73 times more volatile than Inverse High Yield. It trades about -0.16 of its total potential returns per unit of risk. Inverse High Yield is currently generating about 0.1 per unit of volatility. If you would invest 4,845 in Inverse High Yield on September 14, 2024 and sell it today you would earn a total of 77.00 from holding Inverse High Yield or generate 1.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Inverse High Yield
Performance |
Timeline |
Inverse Nasdaq 100 |
Inverse High Yield |
Inverse Nasdaq and Inverse High Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse Nasdaq and Inverse High
The main advantage of trading using opposite Inverse Nasdaq and Inverse High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq position performs unexpectedly, Inverse High 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 Inverse High will offset losses from the drop in Inverse High's long position.Inverse Nasdaq vs. Basic Materials Fund | Inverse Nasdaq vs. Basic Materials Fund | Inverse Nasdaq vs. Banking Fund Class | Inverse Nasdaq vs. Basic Materials Fund |
Inverse High vs. Basic Materials Fund | Inverse High vs. Basic Materials Fund | Inverse High vs. Banking Fund Class | Inverse High vs. Basic Materials Fund |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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