Correlation Between Nasdaq and ACME Lithium
Can any of the company-specific risk be diversified away by investing in both Nasdaq and ACME Lithium 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 ACME Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and ACME Lithium, you can compare the effects of market volatilities on Nasdaq and ACME Lithium 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 ACME Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and ACME Lithium.
Diversification Opportunities for Nasdaq and ACME Lithium
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nasdaq and ACME is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and ACME Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACME Lithium 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 ACME Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACME Lithium has no effect on the direction of Nasdaq i.e., Nasdaq and ACME Lithium go up and down completely randomly.
Pair Corralation between Nasdaq and ACME Lithium
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.16 times more return on investment than ACME Lithium. However, Nasdaq Inc is 6.45 times less risky than ACME Lithium. It trades about 0.05 of its potential returns per unit of risk. ACME Lithium is currently generating about -0.02 per unit of risk. If you would invest 6,149 in Nasdaq Inc on August 30, 2024 and sell it today you would earn a total of 2,156 from holding Nasdaq Inc or generate 35.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. ACME Lithium
Performance |
| Timeline |
| Nasdaq Inc |
| ACME Lithium |
Nasdaq and ACME Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and ACME Lithium
The main advantage of trading using opposite Nasdaq and ACME Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, ACME Lithium 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 ACME Lithium will offset losses from the drop in ACME Lithium's long position.The idea behind Nasdaq Inc and ACME Lithium 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.| ACME Lithium vs. United Lithium Corp | ACME Lithium vs. Alpha Copper Corp | ACME Lithium vs. REDFLEX HOLDINGS LTD | ACME Lithium vs. Global Helium 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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