Correlation Between Nasdaq-100(r) and Mid-cap 15x

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Mid-cap 15x 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 Mid-cap 15x 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 Mid Cap 15x Strategy, you can compare the effects of market volatilities on Nasdaq-100(r) and Mid-cap 15x 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 Mid-cap 15x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Mid-cap 15x.

Diversification Opportunities for Nasdaq-100(r) and Mid-cap 15x

0.91

Correlation Coefficient

Nasdaq-100(r)  Mid-cap 15x

Almost no diversification

The 3 months correlation between Nasdaq-100(r) and Mid-cap is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x 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 Mid-cap 15x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap 15x has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Mid-cap 15x go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Mid-cap 15x

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Mid-cap 15x. In addition to that, Nasdaq-100(r) is 1.73 times more volatile than Mid Cap 15x Strategy. It trades about -0.09 of its total potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about -0.08 per unit of volatility. If you would invest  13,259  in Mid Cap 15x Strategy on December 27, 2024 and sell it today you would lose (1,138) from holding Mid Cap 15x Strategy or give up 8.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Nasdaq 100 2x Strategy  vs.  Mid Cap 15x Strategy

Nasdaq 100 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Mid Cap 15x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap 15x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical 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 Mid-cap 15x

The main advantage of trading using opposite Nasdaq-100(r) and Mid-cap 15x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Mid-cap 15x 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 Mid-cap 15x will offset losses from the drop in Mid-cap 15x's long position.

The idea behind Nasdaq 100 2x Strategy and Mid Cap 15x Strategy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.