Correlation Between Nasdaq and Brother Industries
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Brother Industries 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 Brother Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Brother Industries, you can compare the effects of market volatilities on Nasdaq and Brother Industries 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 Brother Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Brother Industries.
Diversification Opportunities for Nasdaq and Brother Industries
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nasdaq and Brother is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries 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 Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of Nasdaq i.e., Nasdaq and Brother Industries go up and down completely randomly.
Pair Corralation between Nasdaq and Brother Industries
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.44 times more return on investment than Brother Industries. However, Nasdaq Inc is 2.25 times less risky than Brother Industries. It trades about 0.15 of its potential returns per unit of risk. Brother Industries is currently generating about -0.04 per unit of risk. If you would invest 7,682 in Nasdaq Inc on December 5, 2024 and sell it today you would earn a total of 515.00 from holding Nasdaq Inc or generate 6.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.12% |
Values | Daily Returns |
Nasdaq Inc vs. Brother Industries
Performance |
Timeline |
Nasdaq Inc |
Brother Industries |
Nasdaq and Brother Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq and Brother Industries
The main advantage of trading using opposite Nasdaq and Brother Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Brother Industries 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 Brother Industries will offset losses from the drop in Brother Industries' long position.The idea behind Nasdaq Inc and Brother Industries 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.Brother Industries vs. Spyre Therapeutics | Brother Industries vs. National CineMedia | Brother Industries vs. Townsquare Media | Brother Industries vs. Magnite |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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