Correlation Between Nasdaq-100(r) and All Asset

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

Diversification Opportunities for Nasdaq-100(r) and All Asset

0.2

Correlation Coefficient

Nasdaq-100(r)  All Asset

Modest diversification

The 3 months correlation between Nasdaq-100(r) and All is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and All Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Asset Fund 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 All Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Asset Fund has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and All Asset go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and All Asset

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the All Asset. In addition to that, Nasdaq-100(r) is 6.65 times more volatile than All Asset Fund. It trades about -0.1 of its total potential returns per unit of risk. All Asset Fund is currently generating about -0.48 per unit of volatility. If you would invest  1,127  in All Asset Fund on October 9, 2024 and sell it today you would lose (50.00) from holding All Asset Fund or give up 4.44% of portfolio value over 90 days.

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

Nasdaq 100 2x Strategy  vs.  All Asset Fund

Nasdaq 100 2x

Risk-Adjusted Performance

2 of 100

Insignificant

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.

All Asset Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days All Asset Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, All Asset 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 All Asset

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

The idea behind Nasdaq 100 2x Strategy and All Asset Fund 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.