Correlation Between Nasdaq-100 Index and State Street
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index and State Street 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 Nasdaq-100 Index and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Index Fund and State Street Target, you can compare the effects of market volatilities on Nasdaq-100 Index and State Street 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 Nasdaq-100 Index with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and State Street.
Diversification Opportunities for Nasdaq-100 Index and State Street
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nasdaq-100 and State is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target and Nasdaq-100 Index 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 Nasdaq 100 Index Fund are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and State Street go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and State Street
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to under-perform the State Street. In addition to that, Nasdaq-100 Index is 1.71 times more volatile than State Street Target. It trades about -0.16 of its total potential returns per unit of risk. State Street Target is currently generating about -0.07 per unit of volatility. If you would invest 1,568 in State Street Target on December 5, 2024 and sell it today you would lose (17.00) from holding State Street Target or give up 1.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq 100 Index Fund vs. State Street Target
Performance |
Timeline |
Nasdaq 100 Index |
State Street Target |
Nasdaq-100 Index and State Street Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq-100 Index and State Street
The main advantage of trading using opposite Nasdaq-100 Index and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.Nasdaq-100 Index vs. Wisdomtree Siegel Moderate | Nasdaq-100 Index vs. Vanguard Target Retirement | Nasdaq-100 Index vs. Blackrock Moderate Prepared | Nasdaq-100 Index vs. Voya Target Retirement |
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Check out your portfolio center.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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