Correlation Between Short Nasdaq-100 and Large Cap

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

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

Diversification Opportunities for Short Nasdaq-100 and Large Cap

-0.72

Correlation Coefficient

Short Nasdaq-100  Large Cap

Pay attention - limited upside

The 3 months correlation between Short and Large is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Short Nasdaq 100 Profund and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Short 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 Short Nasdaq 100 Profund are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Short Nasdaq-100 i.e., Short Nasdaq-100 and Large Cap go up and down completely randomly.

Pair Corralation between Short Nasdaq-100 and Large Cap

Assuming the 90 days horizon Short Nasdaq 100 Profund is expected to generate 1.02 times more return on investment than Large Cap. However, Short Nasdaq-100 is 1.02 times more volatile than Large Cap Growth Profund. It trades about 0.03 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.0 per unit of risk. If you would invest  4,039  in Short Nasdaq 100 Profund on October 22, 2024 and sell it today you would earn a total of  24.00  from holding Short Nasdaq 100 Profund or generate 0.59% return on investment over 90 days.

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

Short Nasdaq 100 Profund  vs.  Large Cap Growth Profund

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.

Large Cap Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Nasdaq-100 and Large Cap

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

The idea behind Short Nasdaq 100 Profund and Large Cap Growth 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.