Correlation Between Nasdaq and Brembo SpA

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

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

Diversification Opportunities for Nasdaq and Brembo SpA

-0.85

Correlation Coefficient

Nasdaq  Brembo SpA

Pay attention - limited upside

The 3 months correlation between Nasdaq and Brembo is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Brembo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brembo SpA 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 Brembo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brembo SpA has no effect on the direction of Nasdaq i.e., Nasdaq and Brembo SpA go up and down completely randomly.

Pair Corralation between Nasdaq and Brembo SpA

Given the investment horizon of 90 days Nasdaq is expected to generate 1.52 times less return on investment than Brembo SpA. But when comparing it to its historical volatility, Nasdaq Inc is 1.82 times less risky than Brembo SpA. It trades about 0.16 of its potential returns per unit of risk. Brembo SpA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  917.00  in Brembo SpA on September 15, 2024 and sell it today you would earn a total of  40.00  from holding Brembo SpA or generate 4.36% return on investment over 90 days.

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

Nasdaq Inc  vs.  Brembo SpA

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) 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.

Brembo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brembo SpA 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nasdaq and Brembo SpA

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

The idea behind Nasdaq Inc and Brembo SpA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.