Correlation Between Nasdaq 100 and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Mid Cap 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 Nasdaq 100 and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Fund Class and Mid Cap 15x Strategy, you can compare the effects of market volatilities on Nasdaq 100 and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Mid Cap.
Diversification Opportunities for Nasdaq 100 and Mid Cap
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and Mid is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x and 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 Nasdaq 100 Fund Class are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap 15x has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Mid Cap go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Mid Cap
Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.37 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Nasdaq 100 Fund Class is 1.75 times less risky than Mid Cap. It trades about 0.17 of its potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 12,526 in Mid Cap 15x Strategy on June 11, 2025 and sell it today you would earn a total of 1,444 from holding Mid Cap 15x Strategy or generate 11.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Fund Class vs. Mid Cap 15x Strategy
Performance |
| Timeline |
| Nasdaq 100 Fund |
| Mid Cap 15x |
Nasdaq 100 and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Mid Cap
The main advantage of trading using opposite Nasdaq 100 and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Nasdaq 100 vs. Select Fund R | Nasdaq 100 vs. Select Fund C | Nasdaq 100 vs. Morningstar Unconstrained Allocation | Nasdaq 100 vs. Thrivent High Yield |
| Mid Cap vs. Aggressive Balanced Allocation | Mid Cap vs. Mesirow Financial High | Mid Cap vs. Barings High Yield | Mid Cap vs. Gmo High Yield |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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