Correlation Between Nasdaq and Engineers India

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

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

Diversification Opportunities for Nasdaq and Engineers India

0.16

Correlation Coefficient

Nasdaq  Engineers India

Average diversification

The 3 months correlation between Nasdaq and Engineers is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Engineers India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engineers India 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 Engineers India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engineers India has no effect on the direction of Nasdaq i.e., Nasdaq and Engineers India go up and down completely randomly.

Pair Corralation between Nasdaq and Engineers India

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.53 times more return on investment than Engineers India. However, Nasdaq Inc is 1.89 times less risky than Engineers India. It trades about -0.13 of its potential returns per unit of risk. Engineers India Limited is currently generating about -0.29 per unit of risk. If you would invest  8,043  in Nasdaq Inc on October 11, 2024 and sell it today you would lose (241.00) from holding Nasdaq Inc or give up 3.0% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Engineers India Limited

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

OK

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 February 2025.

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engineers India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Nasdaq and Engineers India

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

The idea behind Nasdaq Inc and Engineers India Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.