Correlation Between Nasdaq and Jensen

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

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

Diversification Opportunities for Nasdaq and Jensen

0.4

Correlation Coefficient

Nasdaq  Jensen

Very weak diversification

The 3 months correlation between Nasdaq and Jensen is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Jensen Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Group 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 Jensen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Group has no effect on the direction of Nasdaq i.e., Nasdaq and Jensen go up and down completely randomly.

Pair Corralation between Nasdaq and Jensen

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.82 times more return on investment than Jensen. However, Nasdaq Inc is 1.22 times less risky than Jensen. It trades about 0.12 of its potential returns per unit of risk. Jensen Group is currently generating about 0.06 per unit of risk. If you would invest  5,065  in Nasdaq Inc on September 12, 2024 and sell it today you would earn a total of  3,039  from holding Nasdaq Inc or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.1%
Values	Daily Returns

Nasdaq Inc  vs.  Jensen Group

Nasdaq Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jensen Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jensen Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Jensen is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nasdaq and Jensen

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

The idea behind Nasdaq Inc and Jensen Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.