Correlation Between Nasdaq and 631005BJ3

Can any of the company-specific risk be diversified away by investing in both Nasdaq and 631005BJ3 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 631005BJ3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq Inc and US631005BJ39, you can compare the effects of market volatilities on Nasdaq and 631005BJ3 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 631005BJ3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and 631005BJ3.

Diversification Opportunities for Nasdaq and 631005BJ3

0.8

Correlation Coefficient

Nasdaq  631005BJ3

Very poor diversification

The 3 months correlation between Nasdaq and 631005BJ3 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and US631005BJ39 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US631005BJ39 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 631005BJ3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US631005BJ39 has no effect on the direction of Nasdaq i.e., Nasdaq and 631005BJ3 go up and down completely randomly.

Pair Corralation between Nasdaq and 631005BJ3

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.66 times more return on investment than 631005BJ3. However, Nasdaq is 1.66 times more volatile than US631005BJ39. It trades about 0.05 of its potential returns per unit of risk. US631005BJ39 is currently generating about 0.03 per unit of risk. If you would invest  6,020  in Nasdaq Inc on October 11, 2024 and sell it today you would earn a total of  1,782  from holding Nasdaq Inc or generate 29.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	29.7%
Values	Daily Returns

Nasdaq Inc  vs.  US631005BJ39

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) 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.

US631005BJ39

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US631005BJ39 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 631005BJ3 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 631005BJ3

The main advantage of trading using opposite Nasdaq and 631005BJ3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, 631005BJ3 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 631005BJ3 will offset losses from the drop in 631005BJ3's long position.

The idea behind Nasdaq Inc and US631005BJ39 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.