Correlation Between Nasdaq-100 Fund and Astor Longshort

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Fund and Astor Longshort 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 Fund and Astor Longshort 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 Astor Longshort Fund, you can compare the effects of market volatilities on Nasdaq-100 Fund and Astor Longshort 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 Fund with a short position of Astor Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Fund and Astor Longshort.

Diversification Opportunities for Nasdaq-100 Fund and Astor Longshort

0.88

Correlation Coefficient

Nasdaq-100 Fund  Astor Longshort

Very poor diversification

The 3 months correlation between Nasdaq-100 and Astor is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Astor Longshort Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astor Longshort and Nasdaq-100 Fund 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 Astor Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astor Longshort has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Astor Longshort go up and down completely randomly.

Pair Corralation between Nasdaq-100 Fund and Astor Longshort

Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to under-perform the Astor Longshort. In addition to that, Nasdaq-100 Fund is 2.79 times more volatile than Astor Longshort Fund. It trades about -0.08 of its total potential returns per unit of risk. Astor Longshort Fund is currently generating about -0.02 per unit of volatility. If you would invest  1,271  in Astor Longshort Fund on December 28, 2024 and sell it today you would lose (8.00) from holding Astor Longshort Fund or give up 0.63% of portfolio value over 90 days.

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

Nasdaq 100 Fund Class  vs.  Astor Longshort Fund

Nasdaq 100 Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Astor Longshort

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astor Longshort Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Astor Longshort 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 Fund and Astor Longshort

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

The idea behind Nasdaq 100 Fund Class and Astor Longshort 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.