Correlation Between Nasdaq and CD Projekt

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

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

Diversification Opportunities for Nasdaq and CD Projekt

-0.69

Correlation Coefficient

Nasdaq  CD Projekt

Excellent diversification

The 3 months correlation between Nasdaq and OTGLF is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and CD Projekt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD Projekt SA 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 CD Projekt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD Projekt SA has no effect on the direction of Nasdaq i.e., Nasdaq and CD Projekt go up and down completely randomly.

Pair Corralation between Nasdaq and CD Projekt

Given the investment horizon of 90 days Nasdaq is expected to generate 1.93 times less return on investment than CD Projekt. But when comparing it to its historical volatility, Nasdaq Inc is 2.31 times less risky than CD Projekt. It trades about 0.05 of its potential returns per unit of risk. CD Projekt SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,898  in CD Projekt SA on September 12, 2024 and sell it today you would earn a total of  1,602  from holding CD Projekt SA or generate 55.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Nasdaq Inc  vs.  CD Projekt SA

Nasdaq Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CD Projekt SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, CD Projekt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and CD Projekt

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

The idea behind Nasdaq Inc and CD Projekt SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.