Correlation Between Nasdaq and Middle Island
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Middle Island 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 Middle Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Middle Island Resources, you can compare the effects of market volatilities on Nasdaq and Middle Island 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 Middle Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Middle Island.
Diversification Opportunities for Nasdaq and Middle Island
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nasdaq and Middle is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Middle Island Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middle Island Resources 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 Middle Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middle Island Resources has no effect on the direction of Nasdaq i.e., Nasdaq and Middle Island go up and down completely randomly.
Pair Corralation between Nasdaq and Middle Island
Given the investment horizon of 90 days Nasdaq is expected to generate 44.37 times less return on investment than Middle Island. But when comparing it to its historical volatility, Nasdaq Inc is 45.0 times less risky than Middle Island. It trades about 0.14 of its potential returns per unit of risk. Middle Island Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.15 in Middle Island Resources on September 12, 2024 and sell it today you would earn a total of 0.35 from holding Middle Island Resources or generate 233.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Nasdaq Inc vs. Middle Island Resources
Performance |
| Timeline |
| Nasdaq Inc |
| Middle Island Resources |
Nasdaq and Middle Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Middle Island
The main advantage of trading using opposite Nasdaq and Middle Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Middle Island 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 Middle Island will offset losses from the drop in Middle Island's long position.The idea behind Nasdaq Inc and Middle Island Resources 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.| Middle Island vs. NetSol Technologies | Middle Island vs. ETFS Coffee ETC | Middle Island vs. IMPERIAL TOBACCO | Middle Island vs. ORMAT TECHNOLOGIES |
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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