Correlation Between Nasdaq and Materials Petroleum

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

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

Diversification Opportunities for Nasdaq and Materials Petroleum

0.38

Correlation Coefficient

Nasdaq  Materials Petroleum

Weak diversification

The 3 months correlation between Nasdaq and Materials is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Materials Petroleum JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Petroleum JSC 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 Materials Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Petroleum JSC has no effect on the direction of Nasdaq i.e., Nasdaq and Materials Petroleum go up and down completely randomly.

Pair Corralation between Nasdaq and Materials Petroleum

Given the investment horizon of 90 days Nasdaq is expected to generate 2.04 times less return on investment than Materials Petroleum. But when comparing it to its historical volatility, Nasdaq Inc is 3.35 times less risky than Materials Petroleum. It trades about 0.05 of its potential returns per unit of risk. Materials Petroleum JSC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,601,673  in Materials Petroleum JSC on September 20, 2024 and sell it today you would earn a total of  163,327  from holding Materials Petroleum JSC or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	56.45%
Values	Daily Returns

Nasdaq Inc  vs.  Materials Petroleum JSC

Nasdaq Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 5 (%) 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.

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Petroleum JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Materials Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Materials Petroleum

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

The idea behind Nasdaq Inc and Materials Petroleum JSC 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.