Correlation Between Nasdaq and WISE KTAM

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

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

Diversification Opportunities for Nasdaq and WISE KTAM

-0.05

Correlation Coefficient

Nasdaq  WISE KTAM

Good diversification

The 3 months correlation between Nasdaq and WISE is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and WISE KTAM CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WISE KTAM CSI 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 WISE KTAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WISE KTAM CSI has no effect on the direction of Nasdaq i.e., Nasdaq and WISE KTAM go up and down completely randomly.

Pair Corralation between Nasdaq and WISE KTAM

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the WISE KTAM. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.09 times less risky than WISE KTAM. The stock trades about -0.21 of its potential returns per unit of risk. The WISE KTAM CSI is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  610.00  in WISE KTAM CSI on October 4, 2024 and sell it today you would earn a total of  0.00  from holding WISE KTAM CSI or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Nasdaq Inc  vs.  WISE KTAM CSI

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) 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 February 2025.

WISE KTAM CSI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WISE KTAM CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, WISE KTAM is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and WISE KTAM

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

The idea behind Nasdaq Inc and WISE KTAM CSI 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.