Correlation Between Nasdaq-100 Index and International Fund

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

Diversification Opportunities for Nasdaq-100 Index and International Fund

-0.39

Correlation Coefficient

Nasdaq-100 Index  International Fund

Very good diversification

The 3 months correlation between Nasdaq-100 and International is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund 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 International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and International Fund go up and down completely randomly.

Pair Corralation between Nasdaq-100 Index and International Fund

Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 1.31 times more return on investment than International Fund. However, Nasdaq-100 Index is 1.31 times more volatile than International Fund International. It trades about 0.1 of its potential returns per unit of risk. International Fund International is currently generating about 0.02 per unit of risk. If you would invest  3,175  in Nasdaq 100 Index Fund on October 5, 2024 and sell it today you would earn a total of  1,986  from holding Nasdaq 100 Index Fund or generate 62.55% return on investment over 90 days.

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

Nasdaq 100 Index Fund  vs.  International Fund Internation

Nasdaq 100 Index

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Index Fund are ranked lower than 4 (%) 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.

International Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Fund International 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 technical and fundamental 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.

Pair Trading with Nasdaq-100 Index and International Fund

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

The idea behind Nasdaq 100 Index Fund and International Fund International 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.