Correlation Between Nasdaq and Daxin Materials

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

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

Diversification Opportunities for Nasdaq and Daxin Materials

0.03

Correlation Coefficient

Nasdaq  Daxin Materials

Significant diversification

The 3 months correlation between Nasdaq and Daxin is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Daxin Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daxin Materials 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 Daxin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daxin Materials Corp has no effect on the direction of Nasdaq i.e., Nasdaq and Daxin Materials go up and down completely randomly.

Pair Corralation between Nasdaq and Daxin Materials

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.46 times more return on investment than Daxin Materials. However, Nasdaq Inc is 2.18 times less risky than Daxin Materials. It trades about -0.03 of its potential returns per unit of risk. Daxin Materials Corp is currently generating about -0.01 per unit of risk. If you would invest  7,714  in Nasdaq Inc on December 28, 2024 and sell it today you would lose (223.00) from holding Nasdaq Inc or give up 2.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Nasdaq Inc  vs.  Daxin Materials Corp

Nasdaq Inc

Risk-Adjusted Performance

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.

Daxin Materials Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daxin Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Daxin Materials 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 Daxin Materials

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

The idea behind Nasdaq Inc and Daxin Materials 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.