Correlation Between Japan 2x and Nasdaq-100(r)

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Can any of the company-specific risk be diversified away by investing in both Japan 2x and Nasdaq-100(r) 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 Japan 2x and Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan 2x Strategy and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Japan 2x and Nasdaq-100(r) 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 Japan 2x with a short position of Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan 2x and Nasdaq-100(r).

Diversification Opportunities for Japan 2x and Nasdaq-100(r)

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Japan and Nasdaq-100(r) is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Japan 2x Strategy and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Japan 2x 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 Japan 2x Strategy are associated (or correlated) with Nasdaq-100(r). 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 2x has no effect on the direction of Japan 2x i.e., Japan 2x and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Japan 2x and Nasdaq-100(r)

Assuming the 90 days horizon Japan 2x Strategy is expected to generate 1.04 times more return on investment than Nasdaq-100(r). However, Japan 2x is 1.04 times more volatile than Nasdaq 100 2x Strategy. It trades about 0.32 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.17 per unit of risk. If you would invest  11,590  in Japan 2x Strategy on April 14, 2024 and sell it today you would earn a total of  1,426  from holding Japan 2x Strategy or generate 12.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Japan 2x Strategy  vs.  Nasdaq 100 2x Strategy

 Performance 
       Timeline  
Japan 2x Strategy 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Japan 2x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Japan 2x may actually be approaching a critical reversion point that can send shares even higher in August 2024.
Nasdaq 100 2x 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Nasdaq-100(r) showed solid returns over the last few months and may actually be approaching a breakup point.

Japan 2x and Nasdaq-100(r) Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Japan 2x and Nasdaq-100(r)

The main advantage of trading using opposite Japan 2x and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan 2x position performs unexpectedly, Nasdaq-100(r) 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(r) will offset losses from the drop in Nasdaq-100(r)'s long position.
The idea behind Japan 2x Strategy and Nasdaq 100 2x Strategy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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