Correlation Between Nasdaq and Aristotle Funds

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

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

Diversification Opportunities for Nasdaq and Aristotle Funds

0.9

Correlation Coefficient

Nasdaq  Aristotle Funds

Almost no diversification

The 3 months correlation between Nasdaq and Aristotle is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Aristotle Funds Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Funds Series 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 Aristotle Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Funds Series has no effect on the direction of Nasdaq i.e., Nasdaq and Aristotle Funds go up and down completely randomly.

Pair Corralation between Nasdaq and Aristotle Funds

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Aristotle Funds. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.01 times less risky than Aristotle Funds. The stock trades about -0.12 of its potential returns per unit of risk. The Aristotle Funds Series is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,606  in Aristotle Funds Series on September 21, 2024 and sell it today you would lose (33.00) from holding Aristotle Funds Series or give up 1.27% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Aristotle Funds Series

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) 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.

Aristotle Funds Series

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aristotle Funds Series are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Aristotle Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Aristotle Funds

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

The idea behind Nasdaq Inc and Aristotle Funds Series 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.