Correlation Between Nasdaq and Asian Hotels

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

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

Diversification Opportunities for Nasdaq and Asian Hotels

0.41

Correlation Coefficient

Nasdaq  Asian Hotels

Very weak diversification

The 3 months correlation between Nasdaq and Asian is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Asian Hotels and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Hotels 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 Asian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Hotels has no effect on the direction of Nasdaq i.e., Nasdaq and Asian Hotels go up and down completely randomly.

Pair Corralation between Nasdaq and Asian Hotels

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.79 times more return on investment than Asian Hotels. However, Nasdaq Inc is 1.27 times less risky than Asian Hotels. It trades about -0.01 of its potential returns per unit of risk. Asian Hotels and is currently generating about -0.19 per unit of risk. If you would invest  7,886  in Nasdaq Inc on December 25, 2024 and sell it today you would lose (145.00) from holding Nasdaq Inc or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.92%
Values	Daily Returns

Nasdaq Inc  vs.  Asian Hotels and

Nasdaq Inc

Risk-Adjusted Performance

Very 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.

Asian Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asian Hotels and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nasdaq and Asian Hotels

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

The idea behind Nasdaq Inc and Asian Hotels and 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.