Correlation Between Inverse Nasdaq-100 and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Inverse Nasdaq-100 and Emerging Markets 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 Inverse Nasdaq-100 and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Nasdaq 100 Strategy and Emerging Markets 2x, you can compare the effects of market volatilities on Inverse Nasdaq-100 and Emerging Markets 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 Inverse Nasdaq-100 with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Nasdaq-100 and Emerging Markets.
Diversification Opportunities for Inverse Nasdaq-100 and Emerging Markets
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inverse and Emerging is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Nasdaq 100 Strategy and Emerging Markets 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Inverse 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 Inverse Nasdaq 100 Strategy are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Inverse Nasdaq-100 i.e., Inverse Nasdaq-100 and Emerging Markets go up and down completely randomly.
Pair Corralation between Inverse Nasdaq-100 and Emerging Markets
Assuming the 90 days horizon Inverse Nasdaq 100 Strategy is expected to under-perform the Emerging Markets. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Nasdaq 100 Strategy is 1.96 times less risky than Emerging Markets. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Emerging Markets 2x is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,428 in Emerging Markets 2x on February 4, 2024 and sell it today you would earn a total of 1,175 from holding Emerging Markets 2x or generate 26.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Inverse Nasdaq 100 Strategy vs. Emerging Markets 2x
Performance |
Timeline |
Inverse Nasdaq 100 |
Emerging Markets |
Inverse Nasdaq-100 and Emerging Markets Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse Nasdaq-100 and Emerging Markets
The main advantage of trading using opposite Inverse Nasdaq-100 and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Nasdaq-100 position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.Inverse Nasdaq-100 vs. Basic Materials Fund | Inverse Nasdaq-100 vs. Basic Materials Fund | Inverse Nasdaq-100 vs. Banking Fund Class | Inverse Nasdaq-100 vs. Basic Materials Fund |
Emerging Markets vs. Basic Materials Fund | Emerging Markets vs. Basic Materials Fund | Emerging Markets vs. Banking Fund Class | Emerging Markets vs. Basic Materials Fund |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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