Correlation Between Nasdaq and Gamuda Bhd

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

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

Diversification Opportunities for Nasdaq and Gamuda Bhd

0.67

Correlation Coefficient

Nasdaq  Gamuda Bhd

Poor diversification

The 3 months correlation between Nasdaq and Gamuda is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Gamuda Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamuda Bhd 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 Gamuda Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamuda Bhd has no effect on the direction of Nasdaq i.e., Nasdaq and Gamuda Bhd go up and down completely randomly.

Pair Corralation between Nasdaq and Gamuda Bhd

Given the investment horizon of 90 days Nasdaq is expected to generate 1.77 times less return on investment than Gamuda Bhd. But when comparing it to its historical volatility, Nasdaq Inc is 1.39 times less risky than Gamuda Bhd. It trades about 0.16 of its potential returns per unit of risk. Gamuda Bhd is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Gamuda Bhd on October 7, 2024 and sell it today you would earn a total of  77.00  from holding Gamuda Bhd or generate 19.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Gamuda Bhd

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.

Gamuda Bhd

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gamuda Bhd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Gamuda Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Gamuda Bhd

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

The idea behind Nasdaq Inc and Gamuda Bhd 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.