Correlation Between Nasdaq and CSIF III

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

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

Diversification Opportunities for Nasdaq and CSIF III

0.14

Correlation Coefficient

Nasdaq  CSIF III

Average diversification

The 3 months correlation between Nasdaq and CSIF is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and CSIF III Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSIF III Real and Nasdaq 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 Inc are associated (or correlated) with CSIF III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSIF III Real has no effect on the direction of Nasdaq i.e., Nasdaq and CSIF III go up and down completely randomly.

Pair Corralation between Nasdaq and CSIF III

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.15 times more return on investment than CSIF III. However, Nasdaq is 1.15 times more volatile than CSIF III Real. It trades about -0.22 of its potential returns per unit of risk. CSIF III Real is currently generating about -0.37 per unit of risk. If you would invest  8,241  in Nasdaq Inc on September 27, 2024 and sell it today you would lose (383.00) from holding Nasdaq Inc or give up 4.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Nasdaq Inc  vs.  CSIF III Real

Nasdaq Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CSIF III Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSIF III Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, CSIF III is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and CSIF III

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

The idea behind Nasdaq Inc and CSIF III Real 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.