Correlation Between Technology Ultrasector and Nasdaq-100(r)

Can any of the company-specific risk be diversified away by investing in both Technology Ultrasector and Nasdaq-100(r) 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 Technology Ultrasector and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Technology Ultrasector Profund and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Technology Ultrasector and Nasdaq-100(r) 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 Technology Ultrasector with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Ultrasector and Nasdaq-100(r).

Diversification Opportunities for Technology Ultrasector and Nasdaq-100(r)

0.97

Correlation Coefficient

Technology Ultrasector  Nasdaq-100(r)

Almost no diversification

The 3 months correlation between Technology and Nasdaq-100(r) is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Technology Ultrasector 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 Technology Ultrasector Profund are associated (or correlated) with Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Technology Ultrasector and Nasdaq-100(r)

Assuming the 90 days horizon Technology Ultrasector is expected to generate 1.2 times less return on investment than Nasdaq-100(r). But when comparing it to its historical volatility, Technology Ultrasector Profund is 1.09 times less risky than Nasdaq-100(r). It trades about 0.12 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  48,630  in Nasdaq 100 2x Strategy on August 31, 2024 and sell it today you would earn a total of  8,420  from holding Nasdaq 100 2x Strategy or generate 17.31% return on investment over 90 days.

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

Technology Ultrasector Profund  vs.  Nasdaq 100 2x Strategy

Technology Ultrasector

Risk-Adjusted Performance

9 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Ultrasector Profund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Technology Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq 100 2x

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100(r) showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Technology Ultrasector and Nasdaq-100(r)

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

The idea behind Technology Ultrasector Profund and Nasdaq 100 2x 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.