Correlation Between Nasdaq and Foxconn Industrial

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

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

Diversification Opportunities for Nasdaq and Foxconn Industrial

-0.13

Correlation Coefficient

Nasdaq  Foxconn Industrial

Good diversification

The 3 months correlation between Nasdaq and Foxconn is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Foxconn Industrial Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foxconn Industrial 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 Foxconn Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foxconn Industrial has no effect on the direction of Nasdaq i.e., Nasdaq and Foxconn Industrial go up and down completely randomly.

Pair Corralation between Nasdaq and Foxconn Industrial

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Foxconn Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.91 times less risky than Foxconn Industrial. The stock trades about -0.21 of its potential returns per unit of risk. The Foxconn Industrial Internet is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,211  in Foxconn Industrial Internet on September 24, 2024 and sell it today you would lose (9.00) from holding Foxconn Industrial Internet or give up 0.41% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Foxconn Industrial Internet

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

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 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.

Foxconn Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Foxconn Industrial Internet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Foxconn Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Foxconn Industrial

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

The idea behind Nasdaq Inc and Foxconn Industrial Internet 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.