Correlation Between Nasdaq and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both Nasdaq and M3 Brigade 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 M3 Brigade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq Inc and M3 Brigade Acquisition V, you can compare the effects of market volatilities on Nasdaq and M3 Brigade 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 M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and M3 Brigade.

Diversification Opportunities for Nasdaq and M3 Brigade

0.51

Correlation Coefficient

Nasdaq  M3 Brigade

Very weak diversification

The 3 months correlation between Nasdaq and MBAV is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and M3 Brigade Acquisition V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade Acquisition 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 M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of Nasdaq i.e., Nasdaq and M3 Brigade go up and down completely randomly.

Pair Corralation between Nasdaq and M3 Brigade

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 13.99 times more return on investment than M3 Brigade. However, Nasdaq is 13.99 times more volatile than M3 Brigade Acquisition V. It trades about 0.14 of its potential returns per unit of risk. M3 Brigade Acquisition V is currently generating about 0.13 per unit of risk. If you would invest  4,861  in Nasdaq Inc on September 19, 2024 and sell it today you would earn a total of  2,886  from holding Nasdaq Inc or generate 59.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	21.38%
Values	Daily Returns

Nasdaq Inc  vs.  M3 Brigade Acquisition V

Nasdaq Inc

Risk-Adjusted Performance

5 of 100

OK

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.

M3 Brigade Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, M3 Brigade is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nasdaq and M3 Brigade

The main advantage of trading using opposite Nasdaq and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind Nasdaq Inc and M3 Brigade Acquisition V 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.