Correlation Between Nasdaq-100 Index and Growth Fund

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

Diversification Opportunities for Nasdaq-100 Index and Growth Fund

0.97

Correlation Coefficient

Nasdaq-100 Index  Growth Fund

Almost no diversification

The 3 months correlation between Nasdaq-100 and Growth is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund Growth 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of Nasdaq-100 Index i.e., Nasdaq-100 Index and Growth Fund go up and down completely randomly.

Pair Corralation between Nasdaq-100 Index and Growth Fund

Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to under-perform the Growth Fund. In addition to that, Nasdaq-100 Index is 1.73 times more volatile than Growth Fund Growth. It trades about -0.15 of its total potential returns per unit of risk. Growth Fund Growth is currently generating about -0.13 per unit of volatility. If you would invest  1,760  in Growth Fund Growth on December 29, 2024 and sell it today you would lose (251.00) from holding Growth Fund Growth or give up 14.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Nasdaq 100 Index Fund  vs.  Growth Fund Growth

Nasdaq 100 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 Index 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 forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Growth Fund Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Growth Fund Growth 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 essential indicators remain fairly strong which may send shares a bit higher in April 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 Growth Fund

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

The idea behind Nasdaq 100 Index Fund and Growth Fund Growth 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.