Correlation Between Western and Nasdaq

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

By analyzing existing cross correlation between Western Digital 475 and Nasdaq Inc, you can compare the effects of market volatilities on Western 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 Western with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western and Nasdaq.

Diversification Opportunities for Western and Nasdaq

-0.08

Correlation Coefficient

Western  Nasdaq

Good diversification

The 3 months correlation between Western and Nasdaq is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital 475 and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Western 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 Western Digital 475 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 Western i.e., Western and Nasdaq go up and down completely randomly.

Pair Corralation between Western and Nasdaq

Assuming the 90 days trading horizon Western Digital 475 is expected to generate 1.05 times more return on investment than Nasdaq. However, Western is 1.05 times more volatile than Nasdaq Inc. It trades about -0.14 of its potential returns per unit of risk. Nasdaq Inc is currently generating about -0.17 per unit of risk. If you would invest  9,805  in Western Digital 475 on October 6, 2024 and sell it today you would lose (319.00) from holding Western Digital 475 or give up 3.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Western Digital 475  vs.  Nasdaq Inc

Western Digital 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Western is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Nasdaq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 12 (%) 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.

Pair Trading with Western and Nasdaq

The main advantage of trading using opposite Western and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western 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 Western Digital 475 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.