Correlation Between Nasdaq-100(r) and Dws Emerging

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

Diversification Opportunities for Nasdaq-100(r) and Dws Emerging

0.28

Correlation Coefficient

Nasdaq-100(r)  Dws Emerging

Modest diversification

The 3 months correlation between Nasdaq-100(r) and Dws is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Dws Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dws Emerging Markets 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 Dws Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dws Emerging Markets has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Dws Emerging go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Dws Emerging

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.86 times more return on investment than Dws Emerging. However, Nasdaq-100(r) is 2.86 times more volatile than Dws Emerging Markets. It trades about 0.0 of its potential returns per unit of risk. Dws Emerging Markets is currently generating about -0.03 per unit of risk. If you would invest  41,743  in Nasdaq 100 2x Strategy on October 25, 2024 and sell it today you would lose (121.00) from holding Nasdaq 100 2x Strategy or give up 0.29% 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.  Dws Emerging Markets

Nasdaq 100 2x

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq-100(r) may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dws Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dws Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dws Emerging 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 Dws Emerging

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

The idea behind Nasdaq 100 2x Strategy and Dws Emerging Markets 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.