Correlation Between Nasdaq-100(r) and Intermediate-term

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Intermediate-term 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 Intermediate-term 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 Intermediate Term Tax Free Bond, you can compare the effects of market volatilities on Nasdaq-100(r) and Intermediate-term 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 Intermediate-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Intermediate-term.

Diversification Opportunities for Nasdaq-100(r) and Intermediate-term

0.33

Correlation Coefficient

Nasdaq-100(r)  Intermediate-term

Weak diversification

The 3 months correlation between Nasdaq-100(r) and Intermediate-term is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Intermediate-term go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Intermediate-term

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 11.75 times more return on investment than Intermediate-term. However, Nasdaq-100(r) is 11.75 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.09 of its potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.05 per unit of risk. If you would invest  15,467  in Nasdaq 100 2x Strategy on October 11, 2024 and sell it today you would earn a total of  23,794  from holding Nasdaq 100 2x Strategy or generate 153.84% 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.  Intermediate Term Tax Free Bon

Nasdaq 100 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Nasdaq-100(r) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intermediate Term Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Term Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Intermediate-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq-100(r) and Intermediate-term

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

The idea behind Nasdaq 100 2x Strategy and Intermediate Term Tax Free Bond 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.