Correlation Between Nasdaq and Element Solutions
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Element Solutions 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 Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Element Solutions, you can compare the effects of market volatilities on Nasdaq and Element Solutions 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 Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Element Solutions.
Diversification Opportunities for Nasdaq and Element Solutions
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and Element is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions 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 Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Nasdaq i.e., Nasdaq and Element Solutions go up and down completely randomly.
Pair Corralation between Nasdaq and Element Solutions
Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Element Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.58 times less risky than Element Solutions. The stock trades about -0.14 of its potential returns per unit of risk. The Element Solutions is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,592 in Element Solutions on September 20, 2024 and sell it today you would lose (52.00) from holding Element Solutions or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Element Solutions
Performance |
| Timeline |
| Nasdaq Inc |
| Element Solutions |
Nasdaq and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Element Solutions
The main advantage of trading using opposite Nasdaq and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.The idea behind Nasdaq Inc and Element Solutions 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.| Element Solutions vs. GFL ENVIRONM | Element Solutions vs. RELIANCE STEEL AL | Element Solutions vs. Entravision Communications | Element Solutions vs. Caltagirone SpA |
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.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |