Correlation Between NI Holdings and Nasdaq

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

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

Diversification Opportunities for NI Holdings and Nasdaq

0.76

Correlation Coefficient

NI Holdings  Nasdaq

Poor diversification

The 3 months correlation between NODK and Nasdaq is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and NI Holdings 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 NI Holdings are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of NI Holdings i.e., NI Holdings and Nasdaq go up and down completely randomly.

Pair Corralation between NI Holdings and Nasdaq

Given the investment horizon of 90 days NI Holdings is expected to generate 1.5 times less return on investment than Nasdaq. In addition to that, NI Holdings is 1.26 times more volatile than Nasdaq Inc. It trades about 0.02 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.05 per unit of volatility. If you would invest  5,991  in Nasdaq Inc on September 24, 2024 and sell it today you would earn a total of  1,779  from holding Nasdaq Inc or generate 29.69% return on investment over 90 days.

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

NI Holdings  vs.  Nasdaq Inc

NI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with NI Holdings and Nasdaq

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

The idea behind NI Holdings and Nasdaq 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.