Correlation Between Nasdaq and 00185AAC8

Can any of the company-specific risk be diversified away by investing in both Nasdaq and 00185AAC8 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 00185AAC8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq Inc and AON PLC 445, you can compare the effects of market volatilities on Nasdaq and 00185AAC8 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 00185AAC8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and 00185AAC8.

Diversification Opportunities for Nasdaq and 00185AAC8

-0.26

Correlation Coefficient

Nasdaq  00185AAC8

Very good diversification

The 3 months correlation between Nasdaq and 00185AAC8 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and AON PLC 445 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AON PLC 445 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 00185AAC8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AON PLC 445 has no effect on the direction of Nasdaq i.e., Nasdaq and 00185AAC8 go up and down completely randomly.

Pair Corralation between Nasdaq and 00185AAC8

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.27 times more return on investment than 00185AAC8. However, Nasdaq is 1.27 times more volatile than AON PLC 445. It trades about -0.05 of its potential returns per unit of risk. AON PLC 445 is currently generating about -0.09 per unit of risk. If you would invest  8,274  in Nasdaq Inc on November 28, 2024 and sell it today you would lose (296.00) from holding Nasdaq Inc or give up 3.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.85%
Values	Daily Returns

Nasdaq Inc  vs.  AON PLC 445

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

AON PLC 445

Risk-Adjusted Performance

Very Weak

Over the last 90 days AON PLC 445 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 00185AAC8 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and 00185AAC8

The main advantage of trading using opposite Nasdaq and 00185AAC8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, 00185AAC8 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 00185AAC8 will offset losses from the drop in 00185AAC8's long position.

The idea behind Nasdaq Inc and AON PLC 445 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.