Correlation Between Nasdaq-100 Fund and Growth Opportunities

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

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

Diversification Opportunities for Nasdaq-100 Fund and Growth Opportunities

0.98

Correlation Coefficient

Nasdaq-100 Fund  Growth Opportunities

Almost no diversification

The 3 months correlation between Nasdaq-100 and Growth is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Investor and Growth Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Opportunities and Nasdaq-100 Fund 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 Fund Investor are associated (or correlated) with Growth Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Opportunities has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Growth Opportunities go up and down completely randomly.

Pair Corralation between Nasdaq-100 Fund and Growth Opportunities

Assuming the 90 days horizon Nasdaq 100 Fund Investor is expected to under-perform the Growth Opportunities. In addition to that, Nasdaq-100 Fund is 1.26 times more volatile than Growth Opportunities Fund. It trades about -0.04 of its total potential returns per unit of risk. Growth Opportunities Fund is currently generating about 0.27 per unit of volatility. If you would invest  5,206  in Growth Opportunities Fund on May 4, 2025 and sell it today you would earn a total of  138.00  from holding Growth Opportunities Fund or generate 2.65% return on investment over 90 days.

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

Nasdaq 100 Fund Investor  vs.  Growth Opportunities Fund

Nasdaq 100 Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Fund Investor are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq-100 Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Growth Opportunities

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Growth Opportunities showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq-100 Fund and Growth Opportunities

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

The idea behind Nasdaq 100 Fund Investor and Growth Opportunities 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.