Correlation Between Nasdaq-100(r) and Oil Gas

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Oil Gas 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(r) and Oil Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Oil Gas Ultrasector, you can compare the effects of market volatilities on Nasdaq-100(r) and Oil Gas 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(r) with a short position of Oil Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Oil Gas.

Diversification Opportunities for Nasdaq-100(r) and Oil Gas

0.07

Correlation Coefficient

Nasdaq-100(r)  Oil Gas

Significant diversification

The 3 months correlation between Nasdaq-100(r) and Oil is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Oil Gas Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Gas Ultrasector and Nasdaq-100(r) 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 2x Strategy are associated (or correlated) with Oil Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Gas Ultrasector has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Oil Gas go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Oil Gas

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.19 times more return on investment than Oil Gas. However, Nasdaq-100(r) is 1.19 times more volatile than Oil Gas Ultrasector. It trades about 0.09 of its potential returns per unit of risk. Oil Gas Ultrasector is currently generating about 0.0 per unit of risk. If you would invest  24,382  in Nasdaq 100 2x Strategy on October 5, 2024 and sell it today you would earn a total of  30,461  from holding Nasdaq 100 2x Strategy or generate 124.93% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Oil Gas Ultrasector

Nasdaq 100 2x

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Nasdaq-100(r) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oil Gas Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Gas Ultrasector 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 forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Nasdaq-100(r) and Oil Gas

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

The idea behind Nasdaq 100 2x Strategy and Oil Gas Ultrasector 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.