Correlation Between Nasdaq and PLAIDInc

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

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

Diversification Opportunities for Nasdaq and PLAIDInc

0.1

Correlation Coefficient

Nasdaq  PLAIDInc

Average diversification

The 3 months correlation between Nasdaq and PLAIDInc is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and PLAIDInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAIDInc 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 PLAIDInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAIDInc has no effect on the direction of Nasdaq i.e., Nasdaq and PLAIDInc go up and down completely randomly.

Pair Corralation between Nasdaq and PLAIDInc

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.64 times more return on investment than PLAIDInc. However, Nasdaq Inc is 1.57 times less risky than PLAIDInc. It trades about 0.19 of its potential returns per unit of risk. PLAIDInc is currently generating about 0.09 per unit of risk. If you would invest  5,959  in Nasdaq Inc on September 30, 2024 and sell it today you would earn a total of  1,883  from holding Nasdaq Inc or generate 31.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Nasdaq Inc  vs.  PLAIDInc

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 unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PLAIDInc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PLAIDInc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward indicators, PLAIDInc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and PLAIDInc

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

The idea behind Nasdaq Inc and PLAIDInc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.