Correlation Between MicroStrategy Incorporated and Nasdaq 100

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

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

Diversification Opportunities for MicroStrategy Incorporated and Nasdaq 100

0.81

Correlation Coefficient

MicroStrategy Incorporated  Nasdaq 100

Very poor diversification

The 3 months correlation between MicroStrategy and Nasdaq is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 and MicroStrategy Incorporated 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 MicroStrategy Incorporated 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 has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and Nasdaq 100 go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and Nasdaq 100

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to generate 7.43 times more return on investment than Nasdaq 100. However, MicroStrategy Incorporated is 7.43 times more volatile than Nasdaq 100. It trades about 0.28 of its potential returns per unit of risk. Nasdaq 100 is currently generating about 0.17 per unit of risk. If you would invest  13,077  in MicroStrategy Incorporated on September 12, 2024 and sell it today you would earn a total of  24,655  from holding MicroStrategy Incorporated or generate 188.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

MicroStrategy Incorporated  vs.  Nasdaq 100

MicroStrategy Incorporated

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq 100

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Nasdaq 100 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MicroStrategy Incorporated and Nasdaq 100

The main advantage of trading using opposite MicroStrategy Incorporated and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroStrategy Incorporated 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 MicroStrategy Incorporated and Nasdaq 100 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.