Correlation Between Nasdaq 100 and Hotchkis Wiley

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

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Hotchkis Wiley Large, you can compare the effects of market volatilities on Nasdaq 100 and Hotchkis Wiley 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 Hotchkis Wiley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Hotchkis Wiley.

Diversification Opportunities for Nasdaq 100 and Hotchkis Wiley

0.03

Correlation Coefficient

Nasdaq 100  Hotchkis Wiley

Significant diversification

The 3 months correlation between Nasdaq and Hotchkis is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Hotchkis Wiley Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Large 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 2x Strategy are associated (or correlated) with Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Large has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Hotchkis Wiley

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.51 times more return on investment than Hotchkis Wiley. However, Nasdaq 100 is 1.51 times more volatile than Hotchkis Wiley Large. It trades about 0.11 of its potential returns per unit of risk. Hotchkis Wiley Large is currently generating about -0.06 per unit of risk. If you would invest  36,628  in Nasdaq 100 2x Strategy on September 15, 2024 and sell it today you would earn a total of  5,216  from holding Nasdaq 100 2x Strategy or generate 14.24% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Hotchkis Wiley Large

Nasdaq 100 2x

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq 100 showed solid returns over the last few months and may actually be approaching a breakup point.

Hotchkis Wiley Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotchkis Wiley Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Hotchkis Wiley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq 100 and Hotchkis Wiley

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

The idea behind Nasdaq 100 2x Strategy and Hotchkis Wiley Large 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .