Correlation Between Nasdaq and Sun Sea

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

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

Diversification Opportunities for Nasdaq and Sun Sea

-0.44

Correlation Coefficient

Nasdaq  Sun Sea

Very good diversification

The 3 months correlation between Nasdaq and Sun is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Sun Sea Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Sea Construction 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 Sun Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Sea Construction has no effect on the direction of Nasdaq i.e., Nasdaq and Sun Sea go up and down completely randomly.

Pair Corralation between Nasdaq and Sun Sea

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.66 times more return on investment than Sun Sea. However, Nasdaq Inc is 1.52 times less risky than Sun Sea. It trades about 0.17 of its potential returns per unit of risk. Sun Sea Construction is currently generating about -0.06 per unit of risk. If you would invest  7,268  in Nasdaq Inc on September 18, 2024 and sell it today you would earn a total of  778.00  from holding Nasdaq Inc or generate 10.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Sun Sea Construction

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) 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.

Sun Sea Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Nasdaq Inc and Sun Sea Construction 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.