Correlation Between Nasdaq and Eternal Energy

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

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

Diversification Opportunities for Nasdaq and Eternal Energy

0.47

Correlation Coefficient

Nasdaq  Eternal Energy

Very weak diversification

The 3 months correlation between Nasdaq and Eternal is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy Public 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 Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of Nasdaq i.e., Nasdaq and Eternal Energy go up and down completely randomly.

Pair Corralation between Nasdaq and Eternal Energy

Given the investment horizon of 90 days Nasdaq is expected to generate 64.73 times less return on investment than Eternal Energy. But when comparing it to its historical volatility, Nasdaq Inc is 17.29 times less risky than Eternal Energy. It trades about 0.11 of its potential returns per unit of risk. Eternal Energy Public is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Eternal Energy Public on September 16, 2024 and sell it today you would earn a total of  38.00  from holding Eternal Energy Public or generate 190.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Nasdaq Inc  vs.  Eternal Energy Public

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) 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.

Eternal Energy Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Eternal Energy

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

The idea behind Nasdaq Inc and Eternal Energy Public 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.