Correlation Between Nasdaq 100 and Tekla Life

Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Tekla Life 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 and Tekla Life 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 Tekla Life Sciences, you can compare the effects of market volatilities on Nasdaq 100 and Tekla Life 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 with a short position of Tekla Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Tekla Life.

Diversification Opportunities for Nasdaq 100 and Tekla Life

0.83

Correlation Coefficient

Nasdaq 100  Tekla Life

Very poor diversification

The 3 months correlation between Nasdaq and Tekla is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Tekla Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Life Sciences and Nasdaq 100 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 Tekla Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Life Sciences has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Tekla Life go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Tekla Life

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Tekla Life. In addition to that, Nasdaq 100 is 2.08 times more volatile than Tekla Life Sciences. It trades about -0.11 of its total potential returns per unit of risk. Tekla Life Sciences is currently generating about -0.05 per unit of volatility. If you would invest  1,506  in Tekla Life Sciences on December 20, 2024 and sell it today you would lose (66.00) from holding Tekla Life Sciences or give up 4.38% of portfolio value over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Tekla Life Sciences

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 basic 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.

Tekla Life Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tekla Life Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Tekla Life 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 and Tekla Life

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

The idea behind Nasdaq 100 2x Strategy and Tekla Life Sciences 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.