Correlation Between Nasdaq-100 Fund and Growth Fund

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

Diversification Opportunities for Nasdaq-100 Fund and Growth Fund

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Nasdaq-100 and Growth is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Growth Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund C 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund C has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Growth Fund go up and down completely randomly.

Pair Corralation between Nasdaq-100 Fund and Growth Fund

Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to generate 1.07 times more return on investment than Growth Fund. However, Nasdaq-100 Fund is 1.07 times more volatile than Growth Fund C. It trades about 0.12 of its potential returns per unit of risk. Growth Fund C is currently generating about 0.1 per unit of risk. If you would invest  4,350  in Nasdaq 100 Fund Class on September 6, 2024 and sell it today you would earn a total of  3,550  from holding Nasdaq 100 Fund Class or generate 81.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.79%
ValuesDaily Returns

Nasdaq 100 Fund Class  vs.  Growth Fund C

 Performance 
       Timeline  
Nasdaq 100 Fund 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Fund Class are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100 Fund showed solid returns over the last few months and may actually be approaching a breakup point.
Growth Fund C 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund C are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Growth Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq-100 Fund and Growth Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nasdaq-100 Fund and Growth Fund

The main advantage of trading using opposite Nasdaq-100 Fund and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Fund position performs unexpectedly, Growth Fund 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 Growth Fund will offset losses from the drop in Growth Fund's long position.
The idea behind Nasdaq 100 Fund Class and Growth Fund C 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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