Correlation Between Nasdaq-100(r) and Ep Emerging

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

Diversification Opportunities for Nasdaq-100(r) and Ep Emerging

0.58

Correlation Coefficient

Nasdaq-100(r)  Ep Emerging

Very weak diversification

The 3 months correlation between Nasdaq-100(r) and EPEIX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Ep Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ep Emerging Markets 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 Ep Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ep Emerging Markets has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Ep Emerging go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Ep Emerging

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Ep Emerging. In addition to that, Nasdaq-100(r) is 4.23 times more volatile than Ep Emerging Markets. It trades about -0.06 of its total potential returns per unit of risk. Ep Emerging Markets is currently generating about -0.02 per unit of volatility. If you would invest  1,005  in Ep Emerging Markets on December 1, 2024 and sell it today you would lose (7.00) from holding Ep Emerging Markets or give up 0.7% 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.  Ep Emerging Markets

Nasdaq 100 2x

Risk-Adjusted Performance

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 latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ep Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ep Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ep Emerging 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 Ep Emerging

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

The idea behind Nasdaq 100 2x Strategy and Ep Emerging Markets 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.