Correlation Between FT Cboe and Nasdaq 100

Can any of the company-specific risk be diversified away by investing in both FT Cboe and Nasdaq 100 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 FT Cboe and Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for FT Cboe and Nasdaq 100

0.99

Correlation Coefficient

FT Cboe  Nasdaq 100

No risk reduction

The 3 months correlation between BUFQ and Nasdaq is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and Nasdaq 100 Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Total and FT Cboe 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 FT Cboe Vest are associated (or correlated) with Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Total has no effect on the direction of FT Cboe i.e., FT Cboe and Nasdaq 100 go up and down completely randomly.

Pair Corralation between FT Cboe and Nasdaq 100

Given the investment horizon of 90 days FT Cboe is expected to generate 1.57 times less return on investment than Nasdaq 100. But when comparing it to its historical volatility, FT Cboe Vest is 2.19 times less risky than Nasdaq 100. It trades about 0.15 of its potential returns per unit of risk. Nasdaq 100 Total is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,418,336  in Nasdaq 100 Total on September 30, 2024 and sell it today you would earn a total of  174,817  from holding Nasdaq 100 Total or generate 7.23% return on investment over 90 days.

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

FT Cboe Vest  vs.  Nasdaq 100 Total

Pair Trading with FT Cboe and Nasdaq 100

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

The idea behind FT Cboe Vest and Nasdaq 100 Total 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.