Correlation Between Nasdaq and SANUWAVE Health

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

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

Diversification Opportunities for Nasdaq and SANUWAVE Health

0.54

Correlation Coefficient

Nasdaq  SANUWAVE Health

Very weak diversification

The 3 months correlation between Nasdaq and SANUWAVE is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health 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 SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of Nasdaq i.e., Nasdaq and SANUWAVE Health go up and down completely randomly.

Pair Corralation between Nasdaq and SANUWAVE Health

Given the investment horizon of 90 days Nasdaq is expected to generate 10.86 times less return on investment than SANUWAVE Health. But when comparing it to its historical volatility, Nasdaq Inc is 2.83 times less risky than SANUWAVE Health. It trades about 0.06 of its potential returns per unit of risk. SANUWAVE Health is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,350  in SANUWAVE Health on October 22, 2024 and sell it today you would earn a total of  300.00  from holding SANUWAVE Health or generate 12.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Nasdaq Inc  vs.  SANUWAVE Health

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) 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 February 2025.

SANUWAVE Health

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and SANUWAVE Health

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

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