Correlation Between Nasdaq-100(r) and Marsico 21st

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Marsico 21st 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(r) and Marsico 21st 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 Marsico 21st Century, you can compare the effects of market volatilities on Nasdaq-100(r) and Marsico 21st 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(r) with a short position of Marsico 21st. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Marsico 21st.

Diversification Opportunities for Nasdaq-100(r) and Marsico 21st

0.92

Correlation Coefficient

Nasdaq-100(r)  Marsico 21st

Almost no diversification

The 3 months correlation between Nasdaq-100(r) and Marsico is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Marsico 21st Century in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsico 21st Century and Nasdaq-100(r) 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 Marsico 21st. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsico 21st Century has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Marsico 21st go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Marsico 21st

Assuming the 90 days horizon Nasdaq-100(r) is expected to generate 1.29 times less return on investment than Marsico 21st. In addition to that, Nasdaq-100(r) is 1.99 times more volatile than Marsico 21st Century. It trades about 0.13 of its total potential returns per unit of risk. Marsico 21st Century is currently generating about 0.34 per unit of volatility. If you would invest  4,416  in Marsico 21st Century on August 31, 2024 and sell it today you would earn a total of  1,067  from holding Marsico 21st Century or generate 24.16% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Marsico 21st Century

Nasdaq 100 2x

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq-100(r) showed solid returns over the last few months and may actually be approaching a breakup point.

Marsico 21st Century

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Marsico 21st Century are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Marsico 21st showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq-100(r) and Marsico 21st

The main advantage of trading using opposite Nasdaq-100(r) and Marsico 21st positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Marsico 21st 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 Marsico 21st will offset losses from the drop in Marsico 21st's long position.

The idea behind Nasdaq 100 2x Strategy and Marsico 21st Century 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.