Correlation Between Nasdaq and Saksoft

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

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

Diversification Opportunities for Nasdaq and Saksoft

-0.52

Correlation Coefficient

Nasdaq  Saksoft

Excellent diversification

The 3 months correlation between Nasdaq and Saksoft is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Saksoft Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saksoft Limited 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 Saksoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saksoft Limited has no effect on the direction of Nasdaq i.e., Nasdaq and Saksoft go up and down completely randomly.

Pair Corralation between Nasdaq and Saksoft

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Saksoft. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.67 times less risky than Saksoft. The stock trades about -0.2 of its potential returns per unit of risk. The Saksoft Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  21,366  in Saksoft Limited on September 25, 2024 and sell it today you would earn a total of  480.00  from holding Saksoft Limited or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Nasdaq Inc  vs.  Saksoft Limited

Nasdaq Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 8 (%) 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.

Saksoft Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saksoft Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Nasdaq and Saksoft

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

The idea behind Nasdaq Inc and Saksoft Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.