Correlation Between Nasdaq 100 and Income Fund
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Income 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 and Income 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 Income Fund Income, you can compare the effects of market volatilities on Nasdaq 100 and Income 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 with a short position of Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Income Fund.
Diversification Opportunities for Nasdaq 100 and Income Fund
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nasdaq and Income is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Income Fund Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Income and Nasdaq 100 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Income has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Income Fund go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Income Fund
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 3.06 times more return on investment than Income Fund. However, Nasdaq 100 is 3.06 times more volatile than Income Fund Income. It trades about 0.02 of its potential returns per unit of risk. Income Fund Income is currently generating about -0.09 per unit of risk. If you would invest 5,223 in Nasdaq 100 Index Fund on September 23, 2024 and sell it today you would earn a total of 15.00 from holding Nasdaq 100 Index Fund or generate 0.29% 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. Income Fund Income
Performance |
Timeline |
Nasdaq 100 Index |
Income Fund Income |
Nasdaq 100 and Income Fund Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq 100 and Income Fund
The main advantage of trading using opposite Nasdaq 100 and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Income 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 Income Fund will offset losses from the drop in Income Fund's long position.Nasdaq 100 vs. Metropolitan West Porate | Nasdaq 100 vs. Touchstone Premium Yield | Nasdaq 100 vs. Pace High Yield | Nasdaq 100 vs. Dreyfusstandish Global Fixed |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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