Correlation Between Nasdaq and GrafTech International
Can any of the company-specific risk be diversified away by investing in both Nasdaq and GrafTech International 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 GrafTech International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and GrafTech International, you can compare the effects of market volatilities on Nasdaq and GrafTech International 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 GrafTech International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and GrafTech International.
Diversification Opportunities for Nasdaq and GrafTech International
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and GrafTech is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International 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 GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of Nasdaq i.e., Nasdaq and GrafTech International go up and down completely randomly.
Pair Corralation between Nasdaq and GrafTech International
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.34 times more return on investment than GrafTech International. However, Nasdaq Inc is 2.95 times less risky than GrafTech International. It trades about -0.26 of its potential returns per unit of risk. GrafTech International is currently generating about -0.22 per unit of risk. If you would invest 8,087 in Nasdaq Inc on October 13, 2024 and sell it today you would lose (499.00) from holding Nasdaq Inc or give up 6.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.47% |
| Values | Daily Returns |
Nasdaq Inc vs. GrafTech International
Performance |
| Timeline |
| Nasdaq Inc |
| GrafTech International |
Nasdaq and GrafTech International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and GrafTech International
The main advantage of trading using opposite Nasdaq and GrafTech International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, GrafTech International 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 GrafTech International will offset losses from the drop in GrafTech International's long position.The idea behind Nasdaq Inc and GrafTech International 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.| GrafTech International vs. The Yokohama Rubber | GrafTech International vs. Materialise NV | GrafTech International vs. Martin Marietta Materials | GrafTech International vs. THRACE PLASTICS |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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