Correlation Between Nasdaq and Dimensional 2040

Can any of the company-specific risk be diversified away by investing in both Nasdaq and Dimensional 2040 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 Dimensional 2040 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq Inc and Dimensional 2040 Target, you can compare the effects of market volatilities on Nasdaq and Dimensional 2040 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 Dimensional 2040. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Dimensional 2040.

Diversification Opportunities for Nasdaq and Dimensional 2040

0.56

Correlation Coefficient

Nasdaq  Dimensional 2040

Very weak diversification

The 3 months correlation between Nasdaq and Dimensional is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Dimensional 2040 Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional 2040 Target 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 Dimensional 2040. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional 2040 Target has no effect on the direction of Nasdaq i.e., Nasdaq and Dimensional 2040 go up and down completely randomly.

Pair Corralation between Nasdaq and Dimensional 2040

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 2.12 times more return on investment than Dimensional 2040. However, Nasdaq is 2.12 times more volatile than Dimensional 2040 Target. It trades about 0.17 of its potential returns per unit of risk. Dimensional 2040 Target is currently generating about 0.06 per unit of risk. If you would invest  7,308  in Nasdaq Inc on September 14, 2024 and sell it today you would earn a total of  779.00  from holding Nasdaq Inc or generate 10.66% return on investment over 90 days.

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

Nasdaq Inc  vs.  Dimensional 2040 Target

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) 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.

Dimensional 2040 Target

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional 2040 Target are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dimensional 2040 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Dimensional 2040

The main advantage of trading using opposite Nasdaq and Dimensional 2040 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Dimensional 2040 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 Dimensional 2040 will offset losses from the drop in Dimensional 2040's long position.

The idea behind Nasdaq Inc and Dimensional 2040 Target 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.