Correlation Between Nasdaq and Strategy Shares

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

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

Diversification Opportunities for Nasdaq and Strategy Shares

0.64

Correlation Coefficient

Nasdaq  Strategy Shares

Poor diversification

The 3 months correlation between Nasdaq and Strategy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Strategy Shares Gold Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares Gold 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares Gold has no effect on the direction of Nasdaq i.e., Nasdaq and Strategy Shares go up and down completely randomly.

Pair Corralation between Nasdaq and Strategy Shares

Given the investment horizon of 90 days Nasdaq is expected to generate 1.03 times less return on investment than Strategy Shares. In addition to that, Nasdaq is 1.31 times more volatile than Strategy Shares Gold Hedged. It trades about 0.05 of its total potential returns per unit of risk. Strategy Shares Gold Hedged is currently generating about 0.07 per unit of volatility. If you would invest  1,811  in Strategy Shares Gold Hedged on September 19, 2024 and sell it today you would earn a total of  524.00  from holding Strategy Shares Gold Hedged or generate 28.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.21%
Values	Daily Returns

Nasdaq Inc  vs.  Strategy Shares Gold Hedged

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) 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.

Strategy Shares Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategy Shares Gold Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Strategy Shares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Strategy Shares

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

The idea behind Nasdaq Inc and Strategy Shares Gold Hedged 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.