Correlation Between Nasdaq and Epiroc AB

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

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

Diversification Opportunities for Nasdaq and Epiroc AB

-0.6

Correlation Coefficient

Nasdaq  Epiroc AB

Excellent diversification

The 3 months correlation between Nasdaq and Epiroc is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Epiroc AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epiroc AB 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 Epiroc AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epiroc AB has no effect on the direction of Nasdaq i.e., Nasdaq and Epiroc AB go up and down completely randomly.

Pair Corralation between Nasdaq and Epiroc AB

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Epiroc AB. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.38 times less risky than Epiroc AB. The stock trades about -0.22 of its potential returns per unit of risk. The Epiroc AB is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  19,590  in Epiroc AB on September 24, 2024 and sell it today you would lose (55.00) from holding Epiroc AB or give up 0.28% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Epiroc AB

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) 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.

Epiroc AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Epiroc AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Epiroc AB is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nasdaq and Epiroc AB

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

The idea behind Nasdaq Inc and Epiroc AB 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.