Correlation Between Nasdaq and Northern Graphite

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

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

Diversification Opportunities for Nasdaq and Northern Graphite

0.51

Correlation Coefficient

Nasdaq  Northern Graphite

Very weak diversification

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

Pair Corralation between Nasdaq and Northern Graphite

Given the investment horizon of 90 days Nasdaq is expected to generate 13.26 times less return on investment than Northern Graphite. But when comparing it to its historical volatility, Nasdaq Inc is 10.99 times less risky than Northern Graphite. It trades about 0.14 of its potential returns per unit of risk. Northern Graphite is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Northern Graphite on September 27, 2024 and sell it today you would earn a total of  9.00  from holding Northern Graphite or generate 128.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Nasdaq Inc  vs.  Northern Graphite

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) 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.

Northern Graphite

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Graphite are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Northern Graphite showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Northern Graphite

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

The idea behind Nasdaq Inc and Northern Graphite 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.