Correlation Between Nasdaq-100(r) and Classic Value
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Classic Value 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 Classic Value 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 Classic Value Fund, you can compare the effects of market volatilities on Nasdaq-100(r) and Classic Value 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 Classic Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Classic Value.
Diversification Opportunities for Nasdaq-100(r) and Classic Value
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nasdaq-100(r) and Classic is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Classic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Classic Value 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 Classic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Classic Value has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Classic Value go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Classic Value
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 0.62 times more return on investment than Classic Value. However, Nasdaq 100 2x Strategy is 1.62 times less risky than Classic Value. It trades about 0.04 of its potential returns per unit of risk. Classic Value Fund is currently generating about -0.11 per unit of risk. If you would invest 39,793 in Nasdaq 100 2x Strategy on October 28, 2024 and sell it today you would earn a total of 1,502 from holding Nasdaq 100 2x Strategy or generate 3.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Classic Value Fund
Performance |
Timeline |
Nasdaq 100 2x |
Classic Value |
Nasdaq-100(r) and Classic Value Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq-100(r) and Classic Value
The main advantage of trading using opposite Nasdaq-100(r) and Classic Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Classic Value 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 Classic Value will offset losses from the drop in Classic Value's long position.Nasdaq-100(r) vs. Calvert Large Cap | ||
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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