Correlation Between Nasdaq and Tompkins Financial

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

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

Diversification Opportunities for Nasdaq and Tompkins Financial

0.95

Correlation Coefficient

Nasdaq  Tompkins Financial

Almost no diversification

The 3 months correlation between Nasdaq and Tompkins is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Tompkins Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tompkins Financial 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 Tompkins Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tompkins Financial has no effect on the direction of Nasdaq i.e., Nasdaq and Tompkins Financial go up and down completely randomly.

Pair Corralation between Nasdaq and Tompkins Financial

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.51 times more return on investment than Tompkins Financial. However, Nasdaq Inc is 1.95 times less risky than Tompkins Financial. It trades about -0.19 of its potential returns per unit of risk. Tompkins Financial is currently generating about -0.21 per unit of risk. If you would invest  8,128  in Nasdaq Inc on September 24, 2024 and sell it today you would lose (334.00) from holding Nasdaq Inc or give up 4.11% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Tompkins Financial

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 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.

Tompkins Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tompkins Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Tompkins Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Tompkins Financial

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

The idea behind Nasdaq Inc and Tompkins Financial 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..