Correlation Between Nasdaq and First Capital

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Can any of the company-specific risk be diversified away by investing in both Nasdaq and First Capital 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 First Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and First Capital Bancshares, you can compare the effects of market volatilities on Nasdaq and First Capital 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 First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and First Capital.

Diversification Opportunities for Nasdaq and First Capital

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Nasdaq and First is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and First Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital Bancshares 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 First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital Bancshares has no effect on the direction of Nasdaq i.e., Nasdaq and First Capital go up and down completely randomly.

Pair Corralation between Nasdaq and First Capital

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.76 times more return on investment than First Capital. However, Nasdaq Inc is 1.31 times less risky than First Capital. It trades about 0.17 of its potential returns per unit of risk. First Capital Bancshares is currently generating about 0.05 per unit of risk. If you would invest  7,249  in Nasdaq Inc on September 17, 2024 and sell it today you would earn a total of  797.00  from holding Nasdaq Inc or generate 10.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.46%
ValuesDaily Returns

Nasdaq Inc  vs.  First Capital Bancshares

 Performance 
       Timeline  
Nasdaq Inc 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
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.
First Capital Bancshares 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in First Capital Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nasdaq and First Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nasdaq and First Capital

The main advantage of trading using opposite Nasdaq and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, First Capital 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 First Capital will offset losses from the drop in First Capital's long position.
The idea behind Nasdaq Inc and First Capital Bancshares 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.
Check out your portfolio center.
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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