Correlation Between Nasdaq 100 and Pharmaceuticals Ultrasector

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

Diversification Opportunities for Nasdaq 100 and Pharmaceuticals Ultrasector

0.26

Correlation Coefficient

Nasdaq 100  Pharmaceuticals Ultrasector

Modest diversification

The 3 months correlation between Nasdaq and Pharmaceuticals is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Pharmaceuticals Ultrasector Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmaceuticals Ultrasector 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 Pharmaceuticals Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmaceuticals Ultrasector has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Pharmaceuticals Ultrasector go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Pharmaceuticals Ultrasector

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 0.96 times more return on investment than Pharmaceuticals Ultrasector. However, Nasdaq 100 2x Strategy is 1.04 times less risky than Pharmaceuticals Ultrasector. It trades about 0.33 of its potential returns per unit of risk. Pharmaceuticals Ultrasector Profund is currently generating about 0.07 per unit of risk. If you would invest  30,554  in Nasdaq 100 2x Strategy on April 24, 2025 and sell it today you would earn a total of  12,611  from holding Nasdaq 100 2x Strategy or generate 41.27% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Pharmaceuticals Ultrasector Pr

Nasdaq 100 2x

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq 100 showed solid returns over the last few months and may actually be approaching a breakup point.

Pharmaceuticals Ultrasector

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmaceuticals Ultrasector Profund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Pharmaceuticals Ultrasector may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Nasdaq 100 and Pharmaceuticals Ultrasector

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

The idea behind Nasdaq 100 2x Strategy and Pharmaceuticals Ultrasector Profund 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.