Correlation Between Nasdaq and Nikon Corp

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

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

Diversification Opportunities for Nasdaq and Nikon Corp

0.28

Correlation Coefficient

Nasdaq  Nikon Corp

Modest diversification

The 3 months correlation between Nasdaq and Nikon is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Nikon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikon Corp 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 Nikon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikon Corp has no effect on the direction of Nasdaq i.e., Nasdaq and Nikon Corp go up and down completely randomly.

Pair Corralation between Nasdaq and Nikon Corp

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.44 times more return on investment than Nikon Corp. However, Nasdaq Inc is 2.28 times less risky than Nikon Corp. It trades about 0.13 of its potential returns per unit of risk. Nikon Corp is currently generating about 0.03 per unit of risk. If you would invest  5,050  in Nasdaq Inc on December 3, 2024 and sell it today you would earn a total of  3,147  from holding Nasdaq Inc or generate 62.32% return on investment over 90 days.

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

Nasdaq Inc  vs.  Nikon Corp

Nasdaq Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 3 (%) 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.

Nikon Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nikon Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nasdaq and Nikon Corp

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

The idea behind Nasdaq Inc and Nikon Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.