Correlation Between Nasdaq and Hawkins
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Hawkins 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 Hawkins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Hawkins, you can compare the effects of market volatilities on Nasdaq and Hawkins 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 Hawkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Hawkins.
Diversification Opportunities for Nasdaq and Hawkins
Significant diversification
The 3 months correlation between Nasdaq and Hawkins is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Nasdaq i.e., Nasdaq and Hawkins go up and down completely randomly.
Pair Corralation between Nasdaq and Hawkins
Given the investment horizon of 90 days Nasdaq is expected to generate 4.44 times less return on investment than Hawkins. But when comparing it to its historical volatility, Nasdaq Inc is 1.69 times less risky than Hawkins. It trades about 0.04 of its potential returns per unit of risk. Hawkins is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,004 in Hawkins on August 28, 2024 and sell it today you would earn a total of 9,543 from holding Hawkins or generate 238.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Hawkins
Performance |
| Timeline |
| Nasdaq Inc |
| Hawkins |
Nasdaq and Hawkins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Hawkins
The main advantage of trading using opposite Nasdaq and Hawkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Hawkins 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 Hawkins will offset losses from the drop in Hawkins' long position.The idea behind Nasdaq Inc and Hawkins 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.| Hawkins vs. H B Fuller | Hawkins vs. Minerals Technologies | Hawkins vs. Quaker Chemical | Hawkins vs. Oil Dri |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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