Correlation Between Rydex Inverse and Sp Smallcap

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Rydex Inverse and Sp Smallcap 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 Rydex Inverse and Sp Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rydex Inverse Nasdaq 100 and Sp Smallcap 600, you can compare the effects of market volatilities on Rydex Inverse and Sp Smallcap 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 Rydex Inverse with a short position of Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rydex Inverse and Sp Smallcap.

Diversification Opportunities for Rydex Inverse and Sp Smallcap

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Rydex and RYWAX is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rydex Inverse Nasdaq 100 and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 and Rydex Inverse 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 Rydex Inverse Nasdaq 100 are associated (or correlated) with Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Rydex Inverse i.e., Rydex Inverse and Sp Smallcap go up and down completely randomly.

Pair Corralation between Rydex Inverse and Sp Smallcap

Assuming the 90 days horizon Rydex Inverse Nasdaq 100 is expected to under-perform the Sp Smallcap. In addition to that, Rydex Inverse is 1.54 times more volatile than Sp Smallcap 600. It trades about -0.23 of its total potential returns per unit of risk. Sp Smallcap 600 is currently generating about 0.17 per unit of volatility. If you would invest  5,427  in Sp Smallcap 600 on September 6, 2024 and sell it today you would earn a total of  786.00  from holding Sp Smallcap 600 or generate 14.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.44%
ValuesDaily Returns

Rydex Inverse Nasdaq 100  vs.  Sp Smallcap 600

 Performance 
       Timeline  
Rydex Inverse Nasdaq 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rydex Inverse Nasdaq 100 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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
Sp Smallcap 600 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap 600 are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sp Smallcap showed solid returns over the last few months and may actually be approaching a breakup point.

Rydex Inverse and Sp Smallcap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rydex Inverse and Sp Smallcap

The main advantage of trading using opposite Rydex Inverse and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rydex Inverse position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap's long position.
The idea behind Rydex Inverse Nasdaq 100 and Sp Smallcap 600 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

Other Complementary Tools

Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios
Sectors
List of equity sectors categorizing publicly traded companies based on their primary business activities
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments