Correlation Between Nasdaq and XTM

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

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

Diversification Opportunities for Nasdaq and XTM

0.38

Correlation Coefficient

Nasdaq  XTM

Weak diversification

The 3 months correlation between Nasdaq and XTM is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and XTM Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTM Inc 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 XTM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTM Inc has no effect on the direction of Nasdaq i.e., Nasdaq and XTM go up and down completely randomly.

Pair Corralation between Nasdaq and XTM

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the XTM. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 7.5 times less risky than XTM. The stock trades about 0.0 of its potential returns per unit of risk. The XTM Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.05  in XTM Inc on December 27, 2024 and sell it today you would lose (0.93) from holding XTM Inc or give up 22.96% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  XTM Inc

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.

XTM Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days XTM Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady forward indicators, XTM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nasdaq and XTM

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

The idea behind Nasdaq Inc and XTM Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.