Correlation Between Defiance Quantum and Nuveen NASDAQ

Can any of the company-specific risk be diversified away by investing in both Defiance Quantum and Nuveen NASDAQ 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 Defiance Quantum and Nuveen NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Defiance Quantum and Nuveen NASDAQ

0.9

Correlation Coefficient

Defiance Quantum  Nuveen NASDAQ

Almost no diversification

The 3 months correlation between Defiance and Nuveen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Quantum ETF and Nuveen NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen NASDAQ 100 and Defiance Quantum 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 Defiance Quantum ETF are associated (or correlated) with Nuveen NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen NASDAQ 100 has no effect on the direction of Defiance Quantum i.e., Defiance Quantum and Nuveen NASDAQ go up and down completely randomly.

Pair Corralation between Defiance Quantum and Nuveen NASDAQ

Given the investment horizon of 90 days Defiance Quantum ETF is expected to generate 2.7 times more return on investment than Nuveen NASDAQ. However, Defiance Quantum is 2.7 times more volatile than Nuveen NASDAQ 100. It trades about 0.21 of its potential returns per unit of risk. Nuveen NASDAQ 100 is currently generating about 0.16 per unit of risk. If you would invest  6,138  in Defiance Quantum ETF on September 23, 2024 and sell it today you would earn a total of  1,978  from holding Defiance Quantum ETF or generate 32.23% return on investment over 90 days.

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

Defiance Quantum ETF  vs.  Nuveen NASDAQ 100

Defiance Quantum ETF

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Quantum ETF are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Defiance Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Nuveen NASDAQ 100

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen NASDAQ 100 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Nuveen NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Defiance Quantum and Nuveen NASDAQ

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

The idea behind Defiance Quantum ETF and Nuveen 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..