Correlation Between Nasdaq and Optotech Corp

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

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

Diversification Opportunities for Nasdaq and Optotech Corp

-0.75

Correlation Coefficient

Nasdaq  Optotech Corp

Pay attention - limited upside

The 3 months correlation between Nasdaq and Optotech is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Optotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optotech Corp 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 Optotech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optotech Corp has no effect on the direction of Nasdaq i.e., Nasdaq and Optotech Corp go up and down completely randomly.

Pair Corralation between Nasdaq and Optotech Corp

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.62 times more return on investment than Optotech Corp. However, Nasdaq Inc is 1.62 times less risky than Optotech Corp. It trades about 0.04 of its potential returns per unit of risk. Optotech Corp is currently generating about -0.01 per unit of risk. If you would invest  6,147  in Nasdaq Inc on October 7, 2024 and sell it today you would earn a total of  1,675  from holding Nasdaq Inc or generate 27.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.98%
Values	Daily Returns

Nasdaq Inc  vs.  Optotech Corp

Nasdaq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 12 (%) 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 February 2025.

Optotech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nasdaq and Optotech Corp

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

The idea behind Nasdaq Inc and Optotech Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.