Correlation Between Nasdaq-100 Fund and Select Fund

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

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

Diversification Opportunities for Nasdaq-100 Fund and Select Fund

0.94

Correlation Coefficient

Nasdaq-100 Fund  Select Fund

Almost no diversification

The 3 months correlation between Nasdaq-100 and Select is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Select Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund C and Nasdaq-100 Fund 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 Fund Class are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund C has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Select Fund go up and down completely randomly.

Pair Corralation between Nasdaq-100 Fund and Select Fund

Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to generate 1.07 times more return on investment than Select Fund. However, Nasdaq-100 Fund is 1.07 times more volatile than Select Fund C. It trades about 0.08 of its potential returns per unit of risk. Select Fund C is currently generating about 0.08 per unit of risk. If you would invest  6,945  in Nasdaq 100 Fund Class on August 30, 2024 and sell it today you would earn a total of  842.00  from holding Nasdaq 100 Fund Class or generate 12.12% 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 Fund Class  vs.  Select Fund C

Nasdaq 100 Fund

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Fund Class are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100 Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Select Fund C

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund C are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Select Fund 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 Fund and Select Fund

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

The idea behind Nasdaq 100 Fund Class and Select Fund C 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.