Correlation Between Nasdaq 100 and Consumer Products
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Consumer Products 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 and Consumer Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Fund Class and Consumer Products Fund, you can compare the effects of market volatilities on Nasdaq 100 and Consumer Products 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 with a short position of Consumer Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Consumer Products.
Diversification Opportunities for Nasdaq 100 and Consumer Products
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nasdaq and Consumer is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Consumer Products Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Products and Nasdaq 100 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 Fund Class are associated (or correlated) with Consumer Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Products has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Consumer Products go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Consumer Products
Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to generate 1.17 times more return on investment than Consumer Products. However, Nasdaq 100 is 1.17 times more volatile than Consumer Products Fund. It trades about -0.13 of its potential returns per unit of risk. Consumer Products Fund is currently generating about -0.31 per unit of risk. If you would invest 6,179 in Nasdaq 100 Fund Class on September 23, 2024 and sell it today you would lose (439.00) from holding Nasdaq 100 Fund Class or give up 7.1% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq 100 Fund Class vs. Consumer Products Fund
Performance |
Timeline |
Nasdaq 100 Fund |
Consumer Products |
Nasdaq 100 and Consumer Products Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq 100 and Consumer Products
The main advantage of trading using opposite Nasdaq 100 and Consumer Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Consumer Products 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 Consumer Products will offset losses from the drop in Consumer Products' long position.Nasdaq 100 vs. Nasdaq 100 2x Strategy | Nasdaq 100 vs. Nova Fund Class | Nasdaq 100 vs. Russell 2000 15x | Nasdaq 100 vs. Nasdaq 100 Fund Class |
Consumer Products vs. Basic Materials Fund | Consumer Products vs. Nasdaq 100 Fund Class | Consumer Products vs. Health Care Fund | Consumer Products vs. Energy Fund Class |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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