Correlation Between Nasdaq 100 and Dana Large

Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Dana Large 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 and Dana Large 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 Dana Large Cap, you can compare the effects of market volatilities on Nasdaq 100 and Dana Large 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 with a short position of Dana Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Dana Large.

Diversification Opportunities for Nasdaq 100 and Dana Large

0.95

Correlation Coefficient

Nasdaq 100  Dana Large

Almost no diversification

The 3 months correlation between Nasdaq and Dana is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Dana Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Large Cap and Nasdaq 100 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 Dana Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Large Cap has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Dana Large go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Dana Large

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.87 times more return on investment than Dana Large. However, Nasdaq 100 is 2.87 times more volatile than Dana Large Cap. It trades about 0.11 of its potential returns per unit of risk. Dana Large Cap is currently generating about 0.11 per unit of risk. If you would invest  13,531  in Nasdaq 100 2x Strategy on September 16, 2024 and sell it today you would earn a total of  28,313  from holding Nasdaq 100 2x Strategy or generate 209.25% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Dana Large Cap

Nasdaq 100 2x

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq 100 showed solid returns over the last few months and may actually be approaching a breakup point.

Dana Large Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Large Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Dana Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq 100 and Dana Large

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

The idea behind Nasdaq 100 2x Strategy and Dana Large Cap 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.