Correlation Between Stellar and IncomeShares Nasdaq

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

By analyzing existing cross correlation between Stellar and IncomeShares Nasdaq 100, you can compare the effects of market volatilities on Stellar and IncomeShares 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 Stellar with a short position of IncomeShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and IncomeShares Nasdaq.

Diversification Opportunities for Stellar and IncomeShares Nasdaq

0.52

Correlation Coefficient

Stellar  IncomeShares Nasdaq

Very weak diversification

The 3 months correlation between Stellar and IncomeShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and IncomeShares Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Nasdaq 100 and Stellar 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 Stellar are associated (or correlated) with IncomeShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Nasdaq 100 has no effect on the direction of Stellar i.e., Stellar and IncomeShares Nasdaq go up and down completely randomly.

Pair Corralation between Stellar and IncomeShares Nasdaq

Assuming the 90 days trading horizon Stellar is expected to generate 12.53 times more return on investment than IncomeShares Nasdaq. However, Stellar is 12.53 times more volatile than IncomeShares Nasdaq 100. It trades about 0.25 of its potential returns per unit of risk. IncomeShares Nasdaq 100 is currently generating about -0.02 per unit of risk. If you would invest  9.33  in Stellar on October 24, 2024 and sell it today you would earn a total of  34.67  from holding Stellar or generate 371.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	68.25%
Values	Daily Returns

Stellar  vs.  IncomeShares Nasdaq 100

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

IncomeShares Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IncomeShares Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IncomeShares Nasdaq is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stellar and IncomeShares Nasdaq

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

The idea behind Stellar and IncomeShares Nasdaq 100 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.