Correlation Between Nasdaq 100 and Inverse Nasdaq

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

Diversification Opportunities for Nasdaq 100 and Inverse Nasdaq

-1.0

Correlation Coefficient

Nasdaq 100  Inverse Nasdaq

Pay attention - limited upside

The 3 months correlation between Nasdaq and Inverse is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 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 Inverse Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Inverse Nasdaq go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Inverse Nasdaq

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.98 times more return on investment than Inverse Nasdaq. However, Nasdaq 100 is 1.98 times more volatile than Inverse Nasdaq 100 Strategy. It trades about 0.24 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.22 per unit of risk. If you would invest  32,328  in Nasdaq 100 2x Strategy on May 6, 2025 and sell it today you would earn a total of  9,599  from holding Nasdaq 100 2x Strategy or generate 29.69% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Inverse Nasdaq 100 Strategy

Nasdaq 100 2x

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 19 (%) 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.

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 weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Nasdaq 100 and Inverse Nasdaq

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

The idea behind Nasdaq 100 2x Strategy and Inverse Nasdaq 100 Strategy 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.