Correlation Between Nasdaq and Smead International

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

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

Diversification Opportunities for Nasdaq and Smead International

0.66

Correlation Coefficient

Nasdaq  Smead International

Poor diversification

The 3 months correlation between Nasdaq and Smead is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Smead International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead International Value 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 Smead International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead International Value has no effect on the direction of Nasdaq i.e., Nasdaq and Smead International go up and down completely randomly.

Pair Corralation between Nasdaq and Smead International

Given the investment horizon of 90 days Nasdaq is expected to generate 10.95 times less return on investment than Smead International. In addition to that, Nasdaq is 1.56 times more volatile than Smead International Value. It trades about 0.01 of its total potential returns per unit of risk. Smead International Value is currently generating about 0.14 per unit of volatility. If you would invest  5,192  in Smead International Value on December 4, 2024 and sell it today you would earn a total of  123.00  from holding Smead International Value or generate 2.37% return on investment over 90 days.

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

Nasdaq Inc  vs.  Smead International Value

Nasdaq Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Smead International Value

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smead International Value are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Smead International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Smead International

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

The idea behind Nasdaq Inc and Smead International Value 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.