Correlation Between Nasdaq and Medical Packaging

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

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

Diversification Opportunities for Nasdaq and Medical Packaging

-0.35

Correlation Coefficient

Nasdaq  Medical Packaging

Very good diversification

The 3 months correlation between Nasdaq and Medical is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Medical Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Packaging 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 Medical Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Packaging has no effect on the direction of Nasdaq i.e., Nasdaq and Medical Packaging go up and down completely randomly.

Pair Corralation between Nasdaq and Medical Packaging

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.59 times more return on investment than Medical Packaging. However, Nasdaq Inc is 1.69 times less risky than Medical Packaging. It trades about -0.02 of its potential returns per unit of risk. Medical Packaging is currently generating about -0.04 per unit of risk. If you would invest  8,059  in Nasdaq Inc on December 4, 2024 and sell it today you would lose (183.00) from holding Nasdaq Inc or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.33%
Values	Daily Returns

Nasdaq Inc  vs.  Medical Packaging

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Medical Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medical Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Medical Packaging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nasdaq and Medical Packaging

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

The idea behind Nasdaq Inc and Medical Packaging 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.