Correlation Between Cars and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Nasdaq Inc, you can compare the effects of market volatilities on Cars 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 Cars with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Nasdaq.
Diversification Opportunities for Cars and Nasdaq
Very poor diversification
The 3 months correlation between Cars and Nasdaq is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Cars 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 Cars Inc 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 Cars i.e., Cars and Nasdaq go up and down completely randomly.
Pair Corralation between Cars and Nasdaq
Given the investment horizon of 90 days Cars is expected to generate 27.68 times less return on investment than Nasdaq. In addition to that, Cars is 1.81 times more volatile than Nasdaq Inc. It trades about 0.0 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.11 per unit of volatility. If you would invest 7,942 in Nasdaq Inc on September 12, 2024 and sell it today you would earn a total of 192.00 from holding Nasdaq Inc or generate 2.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Nasdaq Inc
Performance |
| Timeline |
| Cars Inc |
| Nasdaq Inc |
Cars and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Nasdaq
The main advantage of trading using opposite Cars and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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.| Cars vs. Group 1 Automotive | Cars vs. KAR Auction Services | Cars vs. CarMax Inc | Cars vs. Rush Enterprises A |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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