Correlation Between Nasdaq and St James’s
Can any of the company-specific risk be diversified away by investing in both Nasdaq and St James’s 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 Nasdaq and St James’s into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and St Jamess Place, you can compare the effects of market volatilities on Nasdaq and St James’s 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 Nasdaq with a short position of St James’s. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and St James’s.
Diversification Opportunities for Nasdaq and St James’s
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and 1IV is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and St Jamess Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Jamess Place and Nasdaq 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 Nasdaq Inc are associated (or correlated) with St James’s. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Jamess Place has no effect on the direction of Nasdaq i.e., Nasdaq and St James’s go up and down completely randomly.
Pair Corralation between Nasdaq and St James’s
Given the investment horizon of 90 days Nasdaq is expected to generate 1.06 times less return on investment than St James’s. But when comparing it to its historical volatility, Nasdaq Inc is 2.41 times less risky than St James’s. It trades about 0.14 of its potential returns per unit of risk. St Jamess Place is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 759.00 in St Jamess Place on September 14, 2024 and sell it today you would earn a total of 314.00 from holding St Jamess Place or generate 41.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.18% |
| Values | Daily Returns |
Nasdaq Inc vs. St Jamess Place
Performance |
| Timeline |
| Nasdaq Inc |
| St Jamess Place |
Nasdaq and St James’s Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and St James’s
The main advantage of trading using opposite Nasdaq and St James’s positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, St James’s 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 St James’s will offset losses from the drop in St James’s' long position.The idea behind Nasdaq Inc and St Jamess Place 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.| St James’s vs. PROSIEBENSAT1 MEDIADR4 | St James’s vs. X FAB Silicon Foundries | St James’s vs. PARKEN Sport Entertainment | St James’s vs. Nissan Chemical Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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