Correlation Between Dow 2x and Nasdaq-100 Fund

Can any of the company-specific risk be diversified away by investing in both Dow 2x and Nasdaq-100 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 Dow 2x and Nasdaq-100 Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dow 2x Strategy and Nasdaq 100 Fund Class, you can compare the effects of market volatilities on Dow 2x and Nasdaq-100 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 Dow 2x with a short position of Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Nasdaq-100 Fund.

Diversification Opportunities for Dow 2x and Nasdaq-100 Fund

0.96

Correlation Coefficient

Dow 2x  Nasdaq-100 Fund

Almost no diversification

The 3 months correlation between Dow and Nasdaq-100 is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Nasdaq 100 Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund and Dow 2x 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 Dow 2x Strategy are associated (or correlated) with Nasdaq-100 Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of Dow 2x i.e., Dow 2x and Nasdaq-100 Fund go up and down completely randomly.

Pair Corralation between Dow 2x and Nasdaq-100 Fund

Assuming the 90 days horizon Dow 2x is expected to generate 1.1 times less return on investment than Nasdaq-100 Fund. In addition to that, Dow 2x is 1.77 times more volatile than Nasdaq 100 Fund Class. It trades about 0.13 of its total potential returns per unit of risk. Nasdaq 100 Fund Class is currently generating about 0.25 per unit of volatility. If you would invest  5,303  in Nasdaq 100 Fund Class on May 6, 2025 and sell it today you would earn a total of  775.00  from holding Nasdaq 100 Fund Class or generate 14.61% return on investment over 90 days.

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

Dow 2x Strategy  vs.  Nasdaq 100 Fund Class

Dow 2x Strategy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dow 2x Strategy are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Dow 2x showed solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq 100 Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Fund Class are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100 Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dow 2x and Nasdaq-100 Fund

The main advantage of trading using opposite Dow 2x and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Nasdaq-100 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 Nasdaq-100 Fund will offset losses from the drop in Nasdaq-100 Fund's long position.

The idea behind Dow 2x Strategy and Nasdaq 100 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.