Correlation Between Inverse Nasdaq-100 and Energy Fund

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

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

Diversification Opportunities for Inverse Nasdaq-100 and Energy Fund

-0.68

Correlation Coefficient

Inverse Nasdaq-100  Energy Fund

Excellent diversification

The 3 months correlation between Inverse and Energy is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Energy Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Class and Inverse 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 Inverse Nasdaq 100 Strategy are associated (or correlated) with Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Class has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Energy Fund go up and down completely randomly.

Pair Corralation between Inverse Nasdaq-100 and Energy Fund

Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Energy Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Nasdaq 100 Strategy is 1.33 times less risky than Energy Fund. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Energy Fund Class is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  20,408  in Energy Fund Class on May 5, 2025 and sell it today you would earn a total of  1,930  from holding Energy Fund Class or generate 9.46% return on investment over 90 days.

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

Inverse Nasdaq 100 Strategy  vs.  Energy Fund Class

Inverse Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inverse Nasdaq 100 Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Energy Fund Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fund Class are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Energy Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Inverse Nasdaq-100 and Energy Fund

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

The idea behind Inverse Nasdaq 100 Strategy and Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.