Correlation Between Nasdaq and First Quantum

Can any of the company-specific risk be diversified away by investing in both Nasdaq and First Quantum 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 Quantum 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 Quantum Minerals, you can compare the effects of market volatilities on Nasdaq and First Quantum 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 Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and First Quantum.

Diversification Opportunities for Nasdaq and First Quantum

0.6

Correlation Coefficient

Nasdaq  First Quantum

Poor diversification

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

Pair Corralation between Nasdaq and First Quantum

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.34 times more return on investment than First Quantum. However, Nasdaq Inc is 2.98 times less risky than First Quantum. It trades about 0.05 of its potential returns per unit of risk. First Quantum Minerals is currently generating about 0.0 per unit of risk. If you would invest  5,951  in Nasdaq Inc on September 20, 2024 and sell it today you would earn a total of  1,844  from holding Nasdaq Inc or generate 30.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.22%
Values	Daily Returns

Nasdaq Inc  vs.  First Quantum Minerals

Nasdaq Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 5 (%) 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.

First Quantum Minerals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, First Quantum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and First Quantum

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

The idea behind Nasdaq Inc and First Quantum Minerals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.