Correlation Between Nasdaq 100 and First Trust/confluence
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and First Trust/confluence 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 First Trust/confluence 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 First Trustconfluence Small, you can compare the effects of market volatilities on Nasdaq 100 and First Trust/confluence 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 First Trust/confluence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and First Trust/confluence.
Diversification Opportunities for Nasdaq 100 and First Trust/confluence
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and First Trustconfluence Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust/confluence 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 2x Strategy are associated (or correlated) with First Trust/confluence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust/confluence has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and First Trust/confluence go up and down completely randomly.
Pair Corralation between Nasdaq 100 and First Trust/confluence
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.53 times more return on investment than First Trust/confluence. However, Nasdaq 100 is 1.53 times more volatile than First Trustconfluence Small. It trades about 0.22 of its potential returns per unit of risk. First Trustconfluence Small is currently generating about 0.02 per unit of risk. If you would invest 32,924 in Nasdaq 100 2x Strategy on May 3, 2025 and sell it today you would earn a total of 9,003 from holding Nasdaq 100 2x Strategy or generate 27.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq 100 2x Strategy vs. First Trustconfluence Small
Performance |
Timeline |
Nasdaq 100 2x |
First Trust/confluence |
Nasdaq 100 and First Trust/confluence Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq 100 and First Trust/confluence
The main advantage of trading using opposite Nasdaq 100 and First Trust/confluence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, First Trust/confluence 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 First Trust/confluence will offset losses from the drop in First Trust/confluence's long position.Nasdaq 100 vs. John Hancock Financial | Nasdaq 100 vs. Fidelity Advisor Financial | Nasdaq 100 vs. Goldman Sachs Financial | Nasdaq 100 vs. Icon Financial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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