Correlation Between Science Technology and Nasdaq 100

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

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

Diversification Opportunities for Science Technology and Nasdaq 100

1.0

Correlation Coefficient

Science Technology  Nasdaq 100

No risk reduction

The 3 months correlation between Science and Nasdaq is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology Fund and Nasdaq 100 Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Index and Science Technology 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 Science Technology Fund are associated (or correlated) with Nasdaq 100. 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 Index has no effect on the direction of Science Technology i.e., Science Technology and Nasdaq 100 go up and down completely randomly.

Pair Corralation between Science Technology and Nasdaq 100

Assuming the 90 days horizon Science Technology Fund is expected to generate 1.17 times more return on investment than Nasdaq 100. However, Science Technology is 1.17 times more volatile than Nasdaq 100 Index Fund. It trades about 0.36 of its potential returns per unit of risk. Nasdaq 100 Index Fund is currently generating about 0.34 per unit of risk. If you would invest  2,918  in Science Technology Fund on April 24, 2025 and sell it today you would earn a total of  753.00  from holding Science Technology Fund or generate 25.81% return on investment over 90 days.

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

Science Technology Fund  vs.  Nasdaq 100 Index Fund

Science Technology

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Science Technology Fund are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Science Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq 100 Index

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Index Fund are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Nasdaq 100 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Science Technology and Nasdaq 100

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

The idea behind Science Technology Fund and Nasdaq 100 Index 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.