Correlation Between Inverse Russell and Inverse Nasdaq
Can any of the company-specific risk be diversified away by investing in both Inverse Russell and Inverse Nasdaq 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 Russell and Inverse Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Russell 2000 and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Inverse Russell and Inverse Nasdaq 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 Russell with a short position of Inverse Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Russell and Inverse Nasdaq.
Diversification Opportunities for Inverse Russell and Inverse Nasdaq
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Inverse and Inverse is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Russell 2000 and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Inverse Russell 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 Russell 2000 are associated (or correlated) with Inverse Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Inverse Russell i.e., Inverse Russell and Inverse Nasdaq go up and down completely randomly.
Pair Corralation between Inverse Russell and Inverse Nasdaq
Assuming the 90 days horizon Inverse Russell 2000 is expected to generate 1.0 times more return on investment than Inverse Nasdaq. However, Inverse Russell 2000 is 1.0 times less risky than Inverse Nasdaq. It trades about 0.09 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about 0.04 per unit of risk. If you would invest 5,193 in Inverse Russell 2000 on January 19, 2024 and sell it today you would earn a total of 202.00 from holding Inverse Russell 2000 or generate 3.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Inverse Russell 2000 vs. Inverse Nasdaq 100 Strategy
Performance |
Timeline |
Inverse Russell 2000 |
Inverse Nasdaq 100 |
Inverse Russell and Inverse Nasdaq Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse Russell and Inverse Nasdaq
The main advantage of trading using opposite Inverse Russell and Inverse Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Russell position performs unexpectedly, Inverse Nasdaq 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 Inverse Nasdaq will offset losses from the drop in Inverse Nasdaq's long position.Inverse Russell vs. Commodities Strategy Fund | Inverse Russell vs. Eagle Mlp Strategy | Inverse Russell vs. Gmo Emerging Markets | Inverse Russell vs. Siit Emerging Markets |
Inverse Nasdaq vs. Pender Real Estate | Inverse Nasdaq vs. Dreyfus Global Real | Inverse Nasdaq vs. Prudential Real Estate | Inverse Nasdaq vs. Us Real Estate |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |