Correlation Between Nasdaq and Great West

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

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

Diversification Opportunities for Nasdaq and Great West

0.87

Correlation Coefficient

Nasdaq  Great West

Very poor diversification

The 3 months correlation between Nasdaq and Great is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Great West Moderately Aggressi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Moderately 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Moderately has no effect on the direction of Nasdaq i.e., Nasdaq and Great West go up and down completely randomly.

Pair Corralation between Nasdaq and Great West

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 2.19 times more return on investment than Great West. However, Nasdaq is 2.19 times more volatile than Great West Moderately Aggressive. It trades about 0.15 of its potential returns per unit of risk. Great West Moderately Aggressive is currently generating about 0.1 per unit of risk. If you would invest  7,682  in Nasdaq Inc on December 5, 2024 and sell it today you would earn a total of  515.00  from holding Nasdaq Inc or generate 6.7% return on investment over 90 days.

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

Nasdaq Inc  vs.  Great West Moderately Aggressi

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 1 (%) 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.

Great West Moderately

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Moderately Aggressive has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Great West

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

The idea behind Nasdaq Inc and Great West Moderately Aggressive 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.