Correlation Between Nasdaq-100(r) and Black Oak

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

Diversification Opportunities for Nasdaq-100(r) and Black Oak

0.55

Correlation Coefficient

Nasdaq-100(r)  Black Oak

Very weak diversification

The 3 months correlation between Nasdaq-100(r) and Black is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Black Oak Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Oak Emerging 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 Black Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Oak Emerging has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Black Oak go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Black Oak

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.54 times more return on investment than Black Oak. However, Nasdaq-100(r) is 1.54 times more volatile than Black Oak Emerging. It trades about 0.01 of its potential returns per unit of risk. Black Oak Emerging is currently generating about -0.08 per unit of risk. If you would invest  39,536  in Nasdaq 100 2x Strategy on October 10, 2024 and sell it today you would lose (296.00) from holding Nasdaq 100 2x Strategy or give up 0.75% of portfolio value over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Black Oak Emerging

Nasdaq 100 2x

Risk-Adjusted Performance

0 of 100

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.

Black Oak Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Oak Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Nasdaq-100(r) and Black Oak

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

The idea behind Nasdaq 100 2x Strategy and Black Oak Emerging 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.