Correlation Between Nasdaq and Kodiak Gas

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

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

Diversification Opportunities for Nasdaq and Kodiak Gas

0.92

Correlation Coefficient

Nasdaq  Kodiak Gas

Almost no diversification

The 3 months correlation between Nasdaq and Kodiak is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Kodiak Gas Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Gas Services, 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 Kodiak Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Gas Services, has no effect on the direction of Nasdaq i.e., Nasdaq and Kodiak Gas go up and down completely randomly.

Pair Corralation between Nasdaq and Kodiak Gas

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Kodiak Gas. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 2.31 times less risky than Kodiak Gas. The stock trades about -0.17 of its potential returns per unit of risk. The Kodiak Gas Services, is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,105  in Kodiak Gas Services, on September 22, 2024 and sell it today you would lose (125.00) from holding Kodiak Gas Services, or give up 3.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Kodiak Gas Services,

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) 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.

Kodiak Gas Services,

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Gas Services, are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Kodiak Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Kodiak Gas

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

The idea behind Nasdaq Inc and Kodiak Gas Services, 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.