Correlation Between Nasdaq-100(r) and International Small

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

Diversification Opportunities for Nasdaq-100(r) and International Small

-0.1

Correlation Coefficient

Nasdaq-100(r)  International Small

Good diversification

The 3 months correlation between Nasdaq-100(r) and International is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and International Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Small Pany 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 International Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Small Pany has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and International Small go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and International Small

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.52 times more return on investment than International Small. However, Nasdaq-100(r) is 2.52 times more volatile than International Small Pany. It trades about -0.15 of its potential returns per unit of risk. International Small Pany is currently generating about -0.38 per unit of risk. If you would invest  43,724  in Nasdaq 100 2x Strategy on October 9, 2024 and sell it today you would lose (4,484) from holding Nasdaq 100 2x Strategy or give up 10.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Nasdaq 100 2x Strategy  vs.  International Small Pany

Nasdaq 100 2x

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Nasdaq-100(r) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

International Small Pany

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Small Pany has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Nasdaq-100(r) and International Small

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

The idea behind Nasdaq 100 2x Strategy and International Small Pany 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .