Correlation Between Nasdaq 100 and Biotechnology Ultrasector
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Biotechnology Ultrasector 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 Biotechnology 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 Biotechnology Ultrasector Profund, you can compare the effects of market volatilities on Nasdaq 100 and Biotechnology 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 Biotechnology Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Biotechnology Ultrasector.
Diversification Opportunities for Nasdaq 100 and Biotechnology Ultrasector
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Biotechnology is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Biotechnology Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Ultrasector 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 2x Strategy are associated (or correlated) with Biotechnology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Ultrasector has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Biotechnology Ultrasector go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Biotechnology Ultrasector
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 0.69 times more return on investment than Biotechnology Ultrasector. However, Nasdaq 100 2x Strategy is 1.45 times less risky than Biotechnology Ultrasector. It trades about 0.34 of its potential returns per unit of risk. Biotechnology Ultrasector Profund is currently generating about 0.07 per unit of risk. If you would invest 43,534 in Nasdaq 100 2x Strategy on April 24, 2025 and sell it today you would earn a total of 18,722 from holding Nasdaq 100 2x Strategy or generate 43.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Biotechnology Ultrasector Prof
Performance |
| Timeline |
| Nasdaq 100 2x |
| Biotechnology Ultrasector |
Nasdaq 100 and Biotechnology Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Biotechnology Ultrasector
The main advantage of trading using opposite Nasdaq 100 and Biotechnology Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Biotechnology 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 Biotechnology Ultrasector will offset losses from the drop in Biotechnology Ultrasector's long position.| Nasdaq 100 vs. Sp 500 2x | Nasdaq 100 vs. Inverse Nasdaq 100 2x | Nasdaq 100 vs. Inverse Sp 500 | Nasdaq 100 vs. Ultra Nasdaq 100 Profunds |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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