Correlation Between Nasdaq and E3 Metals
Can any of the company-specific risk be diversified away by investing in both Nasdaq and E3 Metals 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 E3 Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and E3 Metals Corp, you can compare the effects of market volatilities on Nasdaq and E3 Metals 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 E3 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and E3 Metals.
Diversification Opportunities for Nasdaq and E3 Metals
Pay attention - limited upside
The 3 months correlation between Nasdaq and EEMMF is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and E3 Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 Metals Corp 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 E3 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 Metals Corp has no effect on the direction of Nasdaq i.e., Nasdaq and E3 Metals go up and down completely randomly.
Pair Corralation between Nasdaq and E3 Metals
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.28 times more return on investment than E3 Metals. However, Nasdaq Inc is 3.59 times less risky than E3 Metals. It trades about 0.62 of its potential returns per unit of risk. E3 Metals Corp is currently generating about -0.05 per unit of risk. If you would invest 7,392 in Nasdaq Inc on September 1, 2024 and sell it today you would earn a total of 907.00 from holding Nasdaq Inc or generate 12.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nasdaq Inc vs. E3 Metals Corp
Performance |
| Timeline |
| Nasdaq Inc |
| E3 Metals Corp |
Nasdaq and E3 Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and E3 Metals
The main advantage of trading using opposite Nasdaq and E3 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, E3 Metals 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 E3 Metals will offset losses from the drop in E3 Metals' long position.The idea behind Nasdaq Inc and E3 Metals Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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