Correlation Between Income Stock and Nasdaq-100 Index

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

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

Diversification Opportunities for Income Stock and Nasdaq-100 Index

-0.22

Correlation Coefficient

Income Stock  Nasdaq-100 Index

Very good diversification

The 3 months correlation between Income and Nasdaq-100 is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Nasdaq 100 Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Index and Income Stock 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 Income Stock Fund are associated (or correlated) with Nasdaq-100 Index. 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 Index has no effect on the direction of Income Stock i.e., Income Stock and Nasdaq-100 Index go up and down completely randomly.

Pair Corralation between Income Stock and Nasdaq-100 Index

Assuming the 90 days horizon Income Stock Fund is expected to under-perform the Nasdaq-100 Index. In addition to that, Income Stock is 2.67 times more volatile than Nasdaq 100 Index Fund. It trades about -0.25 of its total potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about -0.15 per unit of volatility. If you would invest  5,409  in Nasdaq 100 Index Fund on October 13, 2024 and sell it today you would lose (196.00) from holding Nasdaq 100 Index Fund or give up 3.62% of portfolio value over 90 days.

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

Income Stock Fund  vs.  Nasdaq 100 Index Fund

Income Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Income Stock Fund 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Nasdaq 100 Index

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Index Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nasdaq-100 Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Income Stock and Nasdaq-100 Index

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

The idea behind Income Stock Fund and Nasdaq 100 Index Fund 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 CEOs Directory module to screen CEOs from public companies around the world.