Correlation Between Nasdaq and Procyon

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

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

Diversification Opportunities for Nasdaq and Procyon

-0.17

Correlation Coefficient

Nasdaq  Procyon

Good diversification

The 3 months correlation between Nasdaq and Procyon is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Procyon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procyon 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 Procyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procyon has no effect on the direction of Nasdaq i.e., Nasdaq and Procyon go up and down completely randomly.

Pair Corralation between Nasdaq and Procyon

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.15 times more return on investment than Procyon. However, Nasdaq Inc is 6.55 times less risky than Procyon. It trades about 0.12 of its potential returns per unit of risk. Procyon is currently generating about 0.01 per unit of risk. If you would invest  7,283  in Nasdaq Inc on October 1, 2024 and sell it today you would earn a total of  559.00  from holding Nasdaq Inc or generate 7.68% return on investment over 90 days.

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

Nasdaq Inc  vs.  Procyon

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) 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.

Procyon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procyon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Procyon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Procyon

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

The idea behind Nasdaq Inc and Procyon 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.