Correlation Between Nasdaq-100(r) and World Energy

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and World Energy 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(r) and World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and World Energy Fund, you can compare the effects of market volatilities on Nasdaq-100(r) and World Energy 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(r) with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and World Energy.

Diversification Opportunities for Nasdaq-100(r) and World Energy

0.38

Correlation Coefficient

Nasdaq-100(r)  World Energy

Weak diversification

The 3 months correlation between Nasdaq-100(r) and World is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Nasdaq-100(r) 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 2x Strategy are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and World Energy go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and World Energy

Assuming the 90 days horizon Nasdaq-100(r) is expected to generate 51.21 times less return on investment than World Energy. In addition to that, Nasdaq-100(r) is 2.93 times more volatile than World Energy Fund. It trades about 0.0 of its total potential returns per unit of risk. World Energy Fund is currently generating about 0.7 per unit of volatility. If you would invest  1,452  in World Energy Fund on October 25, 2024 and sell it today you would earn a total of  158.00  from holding World Energy Fund or generate 10.88% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  World Energy Fund

Nasdaq 100 2x

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq-100(r) may actually be approaching a critical reversion point that can send shares even higher in February 2025.

World Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq-100(r) and World Energy

The main advantage of trading using opposite Nasdaq-100(r) and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.

The idea behind Nasdaq 100 2x Strategy and World Energy Fund 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.