Correlation Between Nasdaq 100 and Quantitative Longshort

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

Diversification Opportunities for Nasdaq 100 and Quantitative Longshort

0.85

Correlation Coefficient

Nasdaq 100  Quantitative Longshort

Very poor diversification

The 3 months correlation between Nasdaq and Quantitative is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Quantitative Longshort Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative Longshort 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 Quantitative Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative Longshort has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Quantitative Longshort go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Quantitative Longshort

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 5.29 times more return on investment than Quantitative Longshort. However, Nasdaq 100 is 5.29 times more volatile than Quantitative Longshort Equity. It trades about 0.1 of its potential returns per unit of risk. Quantitative Longshort Equity is currently generating about 0.19 per unit of risk. If you would invest  36,628  in Nasdaq 100 2x Strategy on September 16, 2024 and sell it today you would earn a total of  5,216  from holding Nasdaq 100 2x Strategy or generate 14.24% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Quantitative Longshort Equity

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.

Quantitative Longshort

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quantitative Longshort Equity are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Quantitative Longshort 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 and Quantitative Longshort

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

The idea behind Nasdaq 100 2x Strategy and Quantitative Longshort Equity 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.