Correlation Between Nasdaq and Woodside Petroleum

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

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

Diversification Opportunities for Nasdaq and Woodside Petroleum

0.18

Correlation Coefficient

Nasdaq  Woodside Petroleum

Average diversification

The 3 months correlation between Nasdaq and Woodside is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Woodside Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Petroleum 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 Woodside Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Petroleum has no effect on the direction of Nasdaq i.e., Nasdaq and Woodside Petroleum go up and down completely randomly.

Pair Corralation between Nasdaq and Woodside Petroleum

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Woodside Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 5.73 times less risky than Woodside Petroleum. The stock trades about 0.0 of its potential returns per unit of risk. The Woodside Petroleum is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Woodside Petroleum on December 27, 2024 and sell it today you would earn a total of  177.00  from holding Woodside Petroleum or generate 14.63% return on investment over 90 days.

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

Nasdaq Inc  vs.  Woodside Petroleum

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.

Woodside Petroleum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Woodside Petroleum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Woodside Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Woodside Petroleum

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

The idea behind Nasdaq Inc and Woodside Petroleum 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.