Correlation Between Royce Total and Short Nasdaq-100

Can any of the company-specific risk be diversified away by investing in both Royce Total and Short Nasdaq-100 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 Royce Total and Short Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royce Total Return and Short Nasdaq 100 Profund, you can compare the effects of market volatilities on Royce Total and Short Nasdaq-100 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 Royce Total with a short position of Short Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Total and Short Nasdaq-100.

Diversification Opportunities for Royce Total and Short Nasdaq-100

-0.26

Correlation Coefficient

Royce Total  Short Nasdaq-100

Very good diversification

The 3 months correlation between Royce and Short is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Royce Total Return and Short Nasdaq 100 Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Nasdaq 100 and Royce Total 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 Royce Total Return are associated (or correlated) with Short Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Nasdaq 100 has no effect on the direction of Royce Total i.e., Royce Total and Short Nasdaq-100 go up and down completely randomly.

Pair Corralation between Royce Total and Short Nasdaq-100

Assuming the 90 days horizon Royce Total Return is expected to generate 1.2 times more return on investment than Short Nasdaq-100. However, Royce Total is 1.2 times more volatile than Short Nasdaq 100 Profund. It trades about 0.03 of its potential returns per unit of risk. Short Nasdaq 100 Profund is currently generating about -0.05 per unit of risk. If you would invest  756.00  in Royce Total Return on October 22, 2024 and sell it today you would earn a total of  15.00  from holding Royce Total Return or generate 1.98% return on investment over 90 days.

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

Royce Total Return  vs.  Short Nasdaq 100 Profund

Royce Total Return

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Total Return are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Royce Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Short Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Nasdaq 100 Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Short Nasdaq-100 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Total and Short Nasdaq-100

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

The idea behind Royce Total Return and Short Nasdaq 100 Profund 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 Global Correlations module to find global opportunities by holding instruments from different markets.