Correlation Between Nasdaq-100(r) and Nova Fund

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Nova Fund 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 Nova Fund 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 Nova Fund Class, you can compare the effects of market volatilities on Nasdaq-100(r) and Nova Fund 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 Nova Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Nova Fund.

Diversification Opportunities for Nasdaq-100(r) and Nova Fund

0.98

Correlation Coefficient

Nasdaq-100(r)  Nova Fund

Almost no diversification

The 3 months correlation between Nasdaq-100(r) and Nova is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class 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 Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Nova Fund go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Nova Fund

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.92 times more return on investment than Nova Fund. However, Nasdaq-100(r) is 1.92 times more volatile than Nova Fund Class. It trades about 0.14 of its potential returns per unit of risk. Nova Fund Class is currently generating about 0.17 per unit of risk. If you would invest  35,031  in Nasdaq 100 2x Strategy on September 2, 2024 and sell it today you would earn a total of  6,703  from holding Nasdaq 100 2x Strategy or generate 19.13% 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.  Nova Fund Class

Nasdaq 100 2x

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 11 (%) 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.

Nova Fund Class

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Fund Class are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nova Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq-100(r) and Nova Fund

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

The idea behind Nasdaq 100 2x Strategy and Nova Fund Class 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..