diversifiable risk of combining Nasdaq-100 and Financials Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Financials Ultrasector Profund, you can compare the effects of market volatilities on Nasdaq-100 and Financials Ultrasector 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 with a short position of Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 and Financials Ultrasector.
Diversification Opportunities for Nasdaq-100 and Financials Ultrasector
Pair Corralation between Nasdaq-100 and Financials Ultrasector
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 2.07 times more return on investment than Financials Ultrasector. However, Nasdaq-100 is 2.07 times more volatile than Financials Ultrasector Profund. It trades about 0.24 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.25 per unit of risk. If you would invest 31,170 in Nasdaq 100 2x Strategy on December 3, 2023 and sell it today you would earn a total of 3,292 from holding Nasdaq 100 2x Strategy or generate 10.56% return on investment over 90 days.
NASDAQ-100 2X STRATEGY vs. FINANCIALS ULTRASECTOR PROFUND
Nasdaq-100 and Financials Ultrasector Volatility Contrast
Pair Trading with Nasdaq-100 and Financials UltrasectorThe main advantage of trading using opposite Nasdaq-100 and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector's long position. The idea behind Nasdaq 100 2x Strategy and Financials Ultrasector Profund 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
Use generated alerts and portfolio events aggregator to diagnose current holdings
Find actively traded stocks across global markets
Search for actively traded equities including funds and ETFs from over 30 global markets
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Use different Pattern Recognition models to time the market across multiple global exchanges