Correlation Between Nasdaq 100 and New World
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and New World 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 New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Index Fund and New World Fund, you can compare the effects of market volatilities on Nasdaq 100 and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and New World.
Diversification Opportunities for Nasdaq 100 and New World
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nasdaq and New is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund 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 Index Fund are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and New World go up and down completely randomly.
Pair Corralation between Nasdaq 100 and New World
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 1.55 times more return on investment than New World. However, Nasdaq 100 is 1.55 times more volatile than New World Fund. It trades about 0.12 of its potential returns per unit of risk. New World Fund is currently generating about 0.05 per unit of risk. If you would invest 2,757 in Nasdaq 100 Index Fund on September 24, 2024 and sell it today you would earn a total of 2,481 from holding Nasdaq 100 Index Fund or generate 89.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq 100 Index Fund vs. New World Fund
Performance |
Timeline |
Nasdaq 100 Index |
New World Fund |
Nasdaq 100 and New World Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq 100 and New World
The main advantage of trading using opposite Nasdaq 100 and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.Nasdaq 100 vs. Income Stock Fund | Nasdaq 100 vs. Emerging Markets Fund | Nasdaq 100 vs. International Fund International | Nasdaq 100 vs. Small Cap Stock |
New World vs. Balanced Fund Investor | New World vs. Ab Small Cap | New World vs. T Rowe Price | New World vs. Nasdaq 100 Index Fund |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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