Correlation Between Flex and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Flex 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 Flex and Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flex and Nasdaq Inc, you can compare the effects of market volatilities on Flex 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 Flex with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flex and Nasdaq.
Diversification Opportunities for Flex and Nasdaq
Very poor diversification
The 3 months correlation between Flex and Nasdaq is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Flex and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Flex 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 Flex 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 Flex i.e., Flex and Nasdaq go up and down completely randomly.
Pair Corralation between Flex and Nasdaq
Given the investment horizon of 90 days Flex is expected to generate 3.06 times more return on investment than Nasdaq. However, Flex is 3.06 times more volatile than Nasdaq Inc. It trades about 0.22 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.62 per unit of risk. If you would invest 3,467 in Flex on September 1, 2024 and sell it today you would earn a total of 430.00 from holding Flex or generate 12.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flex vs. Nasdaq Inc
Performance |
| Timeline |
| Flex |
| Nasdaq Inc |
Flex and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flex and Nasdaq
The main advantage of trading using opposite Flex and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flex 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 Flex 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.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |