Correlation Between Nasdaq 100 and Hawaiian Tax-free

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

Diversification Opportunities for Nasdaq 100 and Hawaiian Tax-free

-0.43

Correlation Coefficient

Nasdaq 100  Hawaiian Tax-free

Very good diversification

The 3 months correlation between Nasdaq and Hawaiian is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Hawaiian Tax Free Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Tax Free 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 Hawaiian Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Tax Free has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Hawaiian Tax-free go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Hawaiian Tax-free

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 11.89 times more return on investment than Hawaiian Tax-free. However, Nasdaq 100 is 11.89 times more volatile than Hawaiian Tax Free Trust. It trades about 0.16 of its potential returns per unit of risk. Hawaiian Tax Free Trust is currently generating about 0.03 per unit of risk. If you would invest  34,874  in Nasdaq 100 2x Strategy on September 4, 2024 and sell it today you would earn a total of  7,774  from holding Nasdaq 100 2x Strategy or generate 22.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Nasdaq 100 2x Strategy  vs.  Hawaiian Tax Free Trust

Nasdaq 100 2x

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 12 (%) 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.

Hawaiian Tax Free

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hawaiian Tax Free Trust are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Hawaiian Tax-free 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 Hawaiian Tax-free

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

The idea behind Nasdaq 100 2x Strategy and Hawaiian Tax Free Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.