Correlation Between Nasdaq and Millat Tractors

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

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

Diversification Opportunities for Nasdaq and Millat Tractors

0.74

Correlation Coefficient

Nasdaq  Millat Tractors

Poor diversification

The 3 months correlation between Nasdaq and Millat is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Millat Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millat Tractors 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 Millat Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millat Tractors has no effect on the direction of Nasdaq i.e., Nasdaq and Millat Tractors go up and down completely randomly.

Pair Corralation between Nasdaq and Millat Tractors

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Millat Tractors. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 2.37 times less risky than Millat Tractors. The stock trades about -0.22 of its potential returns per unit of risk. The Millat Tractors is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  56,729  in Millat Tractors on September 27, 2024 and sell it today you would earn a total of  5,715  from holding Millat Tractors or generate 10.07% return on investment over 90 days.

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

Nasdaq Inc  vs.  Millat Tractors

Nasdaq Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Millat Tractors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Millat Tractors reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Millat Tractors

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

The idea behind Nasdaq Inc and Millat Tractors 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.