Correlation Between Short Nasdaq-100 and Tax Managed

Can any of the company-specific risk be diversified away by investing in both Short Nasdaq-100 and Tax Managed 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 Tax Managed 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 Tax Managed Mid Small, you can compare the effects of market volatilities on Short Nasdaq-100 and Tax Managed 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 Tax Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Nasdaq-100 and Tax Managed.

Diversification Opportunities for Short Nasdaq-100 and Tax Managed

-0.21

Correlation Coefficient

Short Nasdaq-100  Tax Managed

Very good diversification

The 3 months correlation between Short and Tax is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Short Nasdaq 100 Profund and Tax Managed Mid Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Mid 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 Tax Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Mid has no effect on the direction of Short Nasdaq-100 i.e., Short Nasdaq-100 and Tax Managed go up and down completely randomly.

Pair Corralation between Short Nasdaq-100 and Tax Managed

Assuming the 90 days horizon Short Nasdaq 100 Profund is expected to under-perform the Tax Managed. In addition to that, Short Nasdaq-100 is 1.32 times more volatile than Tax Managed Mid Small. It trades about -0.17 of its total potential returns per unit of risk. Tax Managed Mid Small is currently generating about -0.03 per unit of volatility. If you would invest  4,289  in Tax Managed Mid Small on October 6, 2024 and sell it today you would lose (89.00) from holding Tax Managed Mid Small or give up 2.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Short Nasdaq 100 Profund  vs.  Tax Managed Mid Small

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 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.

Tax Managed Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tax Managed Mid Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax Managed 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 Tax Managed

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

The idea behind Short Nasdaq 100 Profund and Tax Managed Mid Small 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.