Correlation Between Usaa Nasdaq and Extended Market

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

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

Diversification Opportunities for Usaa Nasdaq and Extended Market

0.87

Correlation Coefficient

Usaa Nasdaq  Extended Market

Very poor diversification

The 3 months correlation between Usaa and Extended is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Usaa Nasdaq 100 and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index and Usaa Nasdaq 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 Usaa Nasdaq 100 are associated (or correlated) with Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Usaa Nasdaq i.e., Usaa Nasdaq and Extended Market go up and down completely randomly.

Pair Corralation between Usaa Nasdaq and Extended Market

Assuming the 90 days horizon Usaa Nasdaq 100 is expected to generate 0.96 times more return on investment than Extended Market. However, Usaa Nasdaq 100 is 1.04 times less risky than Extended Market. It trades about 0.19 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.14 per unit of risk. If you would invest  4,879  in Usaa Nasdaq 100 on September 14, 2024 and sell it today you would earn a total of  592.00  from holding Usaa Nasdaq 100 or generate 12.13% return on investment over 90 days.

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

Usaa Nasdaq 100  vs.  Extended Market Index

Usaa Nasdaq 100

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Usaa Nasdaq 100 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Usaa Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Extended Market Index

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Extended Market Index are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Extended Market may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Usaa Nasdaq and Extended Market

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

The idea behind Usaa Nasdaq 100 and Extended Market Index 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.