Correlation Between Nasdaq and SBI Cards

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

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

Diversification Opportunities for Nasdaq and SBI Cards

-0.5

Correlation Coefficient

Nasdaq  SBI Cards

Very good diversification

The 3 months correlation between Nasdaq and SBI is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and SBI Cards and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Cards 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 SBI Cards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Cards has no effect on the direction of Nasdaq i.e., Nasdaq and SBI Cards go up and down completely randomly.

Pair Corralation between Nasdaq and SBI Cards

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the SBI Cards. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.09 times less risky than SBI Cards. The stock trades about -0.26 of its potential returns per unit of risk. The SBI Cards and is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  71,190  in SBI Cards and on September 29, 2024 and sell it today you would lose (3,660) from holding SBI Cards and or give up 5.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

Nasdaq Inc  vs.  SBI Cards and

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.

SBI Cards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBI Cards and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nasdaq and SBI Cards

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

The idea behind Nasdaq Inc and SBI Cards and 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.