Correlation Between Nasdaq and Cyber Security
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Cyber Security 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 Cyber Security into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Cyber Security 1, you can compare the effects of market volatilities on Nasdaq and Cyber Security 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 Cyber Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Cyber Security.
Diversification Opportunities for Nasdaq and Cyber Security
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nasdaq and Cyber is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Cyber Security 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyber Security 1 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 Cyber Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyber Security 1 has no effect on the direction of Nasdaq i.e., Nasdaq and Cyber Security go up and down completely randomly.
Pair Corralation between Nasdaq and Cyber Security
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.15 times more return on investment than Cyber Security. However, Nasdaq Inc is 6.56 times less risky than Cyber Security. It trades about -0.21 of its potential returns per unit of risk. Cyber Security 1 is currently generating about -0.23 per unit of risk. If you would invest 8,128 in Nasdaq Inc on September 24, 2024 and sell it today you would lose (358.00) from holding Nasdaq Inc or give up 4.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Cyber Security 1
Performance |
| Timeline |
| Nasdaq Inc |
| Cyber Security 1 |
Nasdaq and Cyber Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Cyber Security
The main advantage of trading using opposite Nasdaq and Cyber Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Cyber Security 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 Cyber Security will offset losses from the drop in Cyber Security's long position.The idea behind Nasdaq Inc and Cyber Security 1 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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