Correlation Between Nasdaq and Herzfeld Caribbean

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

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

Diversification Opportunities for Nasdaq and Herzfeld Caribbean

-0.39

Correlation Coefficient

Nasdaq  Herzfeld Caribbean

Very good diversification

The 3 months correlation between Nasdaq and Herzfeld is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Herzfeld Caribbean Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herzfeld Caribbean Basin 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 Herzfeld Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herzfeld Caribbean Basin has no effect on the direction of Nasdaq i.e., Nasdaq and Herzfeld Caribbean go up and down completely randomly.

Pair Corralation between Nasdaq and Herzfeld Caribbean

Given the investment horizon of 90 days Nasdaq is expected to generate 12.34 times less return on investment than Herzfeld Caribbean. But when comparing it to its historical volatility, Nasdaq Inc is 1.06 times less risky than Herzfeld Caribbean. It trades about 0.01 of its potential returns per unit of risk. Herzfeld Caribbean Basin is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  234.00  in Herzfeld Caribbean Basin on December 28, 2024 and sell it today you would earn a total of  32.00  from holding Herzfeld Caribbean Basin or generate 13.68% return on investment over 90 days.

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

Nasdaq Inc  vs.  Herzfeld Caribbean Basin

Nasdaq Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 1 (%) 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.

Herzfeld Caribbean Basin

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady fundamental drivers, Herzfeld Caribbean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Herzfeld Caribbean

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

The idea behind Nasdaq Inc and Herzfeld Caribbean Basin 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.