Correlation Between Nasdaq-100(r) and Pace Large

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

Diversification Opportunities for Nasdaq-100(r) and Pace Large

0.46

Correlation Coefficient

Nasdaq-100(r)  Pace Large

Very weak diversification

The 3 months correlation between Nasdaq-100(r) and Pace is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Pace Large Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Growth 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 Pace Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Large Growth has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Pace Large go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Pace Large

Assuming the 90 days horizon Nasdaq-100(r) is expected to generate 1.47 times less return on investment than Pace Large. In addition to that, Nasdaq-100(r) is 2.23 times more volatile than Pace Large Growth. It trades about 0.02 of its total potential returns per unit of risk. Pace Large Growth is currently generating about 0.07 per unit of volatility. If you would invest  1,585  in Pace Large Growth on October 26, 2024 and sell it today you would earn a total of  23.00  from holding Pace Large Growth or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Nasdaq 100 2x Strategy  vs.  Pace Large Growth

Nasdaq 100 2x

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100(r) may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pace Large Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pace Large Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pace Large 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(r) and Pace Large

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

The idea behind Nasdaq 100 2x Strategy and Pace Large Growth 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.