Correlation Between Nasdaq and Micro-Mechanics (Holdings)
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Micro Mechanics, you can compare the effects of market volatilities on Nasdaq and Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings). Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Micro-Mechanics (Holdings).
Diversification Opportunities for Nasdaq and Micro-Mechanics (Holdings)
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Micro-Mechanics is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Micro Mechanics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro-Mechanics (Holdings) has no effect on the direction of Nasdaq i.e., Nasdaq and Micro-Mechanics (Holdings) go up and down completely randomly.
Pair Corralation between Nasdaq and Micro-Mechanics (Holdings)
Given the investment horizon of 90 days Nasdaq is expected to generate 1.47 times less return on investment than Micro-Mechanics (Holdings). But when comparing it to its historical volatility, Nasdaq Inc is 3.34 times less risky than Micro-Mechanics (Holdings). It trades about 0.3 of its potential returns per unit of risk. Micro Mechanics is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 99.00 in Micro Mechanics on August 30, 2024 and sell it today you would earn a total of 18.00 from holding Micro Mechanics or generate 18.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Nasdaq Inc vs. Micro Mechanics
Performance |
| Timeline |
| Nasdaq Inc |
| Micro-Mechanics (Holdings) |
Nasdaq and Micro-Mechanics (Holdings) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Micro-Mechanics (Holdings)
The main advantage of trading using opposite Nasdaq and Micro-Mechanics (Holdings) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Micro-Mechanics (Holdings) 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 Micro-Mechanics (Holdings) will offset losses from the drop in Micro-Mechanics (Holdings)'s long position.The idea behind Nasdaq Inc and Micro Mechanics 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.| Micro-Mechanics (Holdings) vs. ASML Holding NV | Micro-Mechanics (Holdings) vs. ASML Holding NV | Micro-Mechanics (Holdings) vs. Applied Materials | Micro-Mechanics (Holdings) vs. Lam Research Corp |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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