Correlation Between Nasdaq and Daiwa House

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

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

Diversification Opportunities for Nasdaq and Daiwa House

0.63

Correlation Coefficient

Nasdaq  Daiwa House

Poor diversification

The 3 months correlation between Nasdaq and Daiwa is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry 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 Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of Nasdaq i.e., Nasdaq and Daiwa House go up and down completely randomly.

Pair Corralation between Nasdaq and Daiwa House

Given the investment horizon of 90 days Nasdaq is expected to generate 1.11 times less return on investment than Daiwa House. But when comparing it to its historical volatility, Nasdaq Inc is 1.13 times less risky than Daiwa House. It trades about 0.05 of its potential returns per unit of risk. Daiwa House Industry is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,160  in Daiwa House Industry on September 23, 2024 and sell it today you would earn a total of  720.00  from holding Daiwa House Industry or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.03%
Values	Daily Returns

Nasdaq Inc  vs.  Daiwa House Industry

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) 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.

Daiwa House Industry

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daiwa House Industry are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Daiwa House is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nasdaq and Daiwa House

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

The idea behind Nasdaq Inc and Daiwa House Industry 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.