Correlation Between Nasdaq 100 and Commodities Strategy

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

Diversification Opportunities for Nasdaq 100 and Commodities Strategy

0.79

Correlation Coefficient

Nasdaq 100  Commodities Strategy

Poor diversification

The 3 months correlation between Nasdaq and Commodities is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy 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 Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Commodities Strategy go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Commodities Strategy

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the Commodities Strategy. In addition to that, Nasdaq 100 is 3.86 times more volatile than Commodities Strategy Fund. It trades about -0.03 of its total potential returns per unit of risk. Commodities Strategy Fund is currently generating about -0.1 per unit of volatility. If you would invest  8,620  in Commodities Strategy Fund on February 3, 2025 and sell it today you would lose (679.00) from holding Commodities Strategy Fund or give up 7.88% of portfolio value over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Commodities Strategy Fund

Nasdaq 100 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Commodities Strategy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nasdaq 100 and Commodities Strategy

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

The idea behind Nasdaq 100 2x Strategy and Commodities Strategy Fund 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.