Correlation Between Nasdaq and Aggressive Growth

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

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

Diversification Opportunities for Nasdaq and Aggressive Growth

0.86

Correlation Coefficient

Nasdaq  Aggressive Growth

Very poor diversification

The 3 months correlation between Nasdaq and Aggressive is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Nasdaq i.e., Nasdaq and Aggressive Growth go up and down completely randomly.

Pair Corralation between Nasdaq and Aggressive Growth

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Aggressive Growth. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.33 times less risky than Aggressive Growth. The stock trades about -0.22 of its potential returns per unit of risk. The Aggressive Growth Fund is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  7,123  in Aggressive Growth Fund on September 24, 2024 and sell it today you would lose (187.00) from holding Aggressive Growth Fund or give up 2.63% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Aggressive Growth Fund

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

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.

Aggressive Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Growth Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Aggressive Growth 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 Aggressive Growth

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

The idea behind Nasdaq Inc and Aggressive Growth Fund 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.