Correlation Between Nasdaq-100(r) and Europe 125x

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Europe 125x 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 Europe 125x 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 Europe 125x Strategy, you can compare the effects of market volatilities on Nasdaq-100(r) and Europe 125x 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 Europe 125x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Europe 125x.

Diversification Opportunities for Nasdaq-100(r) and Europe 125x

-0.54

Correlation Coefficient

Nasdaq-100(r)  Europe 125x

Excellent diversification

The 3 months correlation between Nasdaq-100(r) and Europe is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Europe 125x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europe 125x Strategy 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 Europe 125x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europe 125x Strategy has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Europe 125x go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Europe 125x

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Europe 125x. In addition to that, Nasdaq-100(r) is 2.5 times more volatile than Europe 125x Strategy. It trades about -0.11 of its total potential returns per unit of risk. Europe 125x Strategy is currently generating about 0.21 per unit of volatility. If you would invest  9,943  in Europe 125x Strategy on December 28, 2024 and sell it today you would earn a total of  1,466  from holding Europe 125x Strategy or generate 14.74% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Europe 125x Strategy

Nasdaq 100 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy 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 essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Europe 125x Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Europe 125x Strategy are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Europe 125x showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq-100(r) and Europe 125x

The main advantage of trading using opposite Nasdaq-100(r) and Europe 125x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Europe 125x 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 Europe 125x will offset losses from the drop in Europe 125x's long position.

The idea behind Nasdaq 100 2x Strategy and Europe 125x Strategy 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.