Correlation Between Nasdaq and Kaimei Electronic

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

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

Diversification Opportunities for Nasdaq and Kaimei Electronic

0.26

Correlation Coefficient

Nasdaq  Kaimei Electronic

Modest diversification

The 3 months correlation between Nasdaq and Kaimei is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Kaimei Electronic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaimei Electronic 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 Kaimei Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaimei Electronic Corp has no effect on the direction of Nasdaq i.e., Nasdaq and Kaimei Electronic go up and down completely randomly.

Pair Corralation between Nasdaq and Kaimei Electronic

Given the investment horizon of 90 days Nasdaq is expected to generate 1.07 times less return on investment than Kaimei Electronic. But when comparing it to its historical volatility, Nasdaq Inc is 1.54 times less risky than Kaimei Electronic. It trades about 0.04 of its potential returns per unit of risk. Kaimei Electronic Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,720  in Kaimei Electronic Corp on October 3, 2024 and sell it today you would earn a total of  1,180  from holding Kaimei Electronic Corp or generate 20.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Nasdaq Inc  vs.  Kaimei Electronic Corp

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) 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.

Kaimei Electronic Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaimei Electronic Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kaimei Electronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nasdaq and Kaimei Electronic

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

The idea behind Nasdaq Inc and Kaimei Electronic 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..