Correlation Between Locafy and Nasdaq

Can any of the company-specific risk be diversified away by investing in both Locafy and 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 Locafy and Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Locafy Limited and Nasdaq Inc, you can compare the effects of market volatilities on Locafy and 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 Locafy with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locafy and Nasdaq.

Diversification Opportunities for Locafy and Nasdaq

0.36

Correlation Coefficient

Locafy  Nasdaq

Weak diversification

The 3 months correlation between Locafy and Nasdaq is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Locafy Limited and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Locafy 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 Locafy Limited are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Locafy i.e., Locafy and Nasdaq go up and down completely randomly.

Pair Corralation between Locafy and Nasdaq

Assuming the 90 days horizon Locafy Limited is expected to generate 24.52 times more return on investment than Nasdaq. However, Locafy is 24.52 times more volatile than Nasdaq Inc. It trades about 0.25 of its potential returns per unit of risk. Nasdaq Inc is currently generating about -0.05 per unit of risk. If you would invest  740.00  in Locafy Limited on November 28, 2024 and sell it today you would earn a total of  2,370  from holding Locafy Limited or generate 320.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.05%
Values	Daily Returns

Locafy Limited  vs.  Nasdaq Inc

Locafy Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Locafy Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Locafy and Nasdaq

The main advantage of trading using opposite Locafy and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Locafy position performs unexpectedly, 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 Nasdaq will offset losses from the drop in Nasdaq's long position.

The idea behind Locafy Limited and Nasdaq Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.