Correlation Between Nasdaq and Big Rock

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

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

Diversification Opportunities for Nasdaq and Big Rock

0.51

Correlation Coefficient

Nasdaq  Big Rock

Very weak diversification

The 3 months correlation between Nasdaq and Big is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery 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 Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of Nasdaq i.e., Nasdaq and Big Rock go up and down completely randomly.

Pair Corralation between Nasdaq and Big Rock

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Big Rock. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 4.07 times less risky than Big Rock. The stock trades about -0.02 of its potential returns per unit of risk. The Big Rock Brewery is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  112.00  in Big Rock Brewery on December 24, 2024 and sell it today you would lose (2.00) from holding Big Rock Brewery or give up 1.79% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Big Rock Brewery

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.

Big Rock Brewery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big Rock Brewery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Big Rock may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nasdaq and Big Rock

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

The idea behind Nasdaq Inc and Big Rock Brewery 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.