Correlation Between Nasdaq and Americas Gold
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Americas Gold 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 Americas Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Americas Gold and, you can compare the effects of market volatilities on Nasdaq and Americas Gold 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 Americas Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Americas Gold.
Diversification Opportunities for Nasdaq and Americas Gold
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nasdaq and Americas is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Americas Gold and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Gold 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 Americas Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Gold has no effect on the direction of Nasdaq i.e., Nasdaq and Americas Gold go up and down completely randomly.
Pair Corralation between Nasdaq and Americas Gold
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.2 times more return on investment than Americas Gold. However, Nasdaq Inc is 5.09 times less risky than Americas Gold. It trades about -0.18 of its potential returns per unit of risk. Americas Gold and is currently generating about -0.05 per unit of risk. If you would invest 8,083 in Nasdaq Inc on September 23, 2024 and sell it today you would lose (313.00) from holding Nasdaq Inc or give up 3.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nasdaq Inc vs. Americas Gold and
Performance |
| Timeline |
| Nasdaq Inc |
| Americas Gold |
Nasdaq and Americas Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Americas Gold
The main advantage of trading using opposite Nasdaq and Americas Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Americas Gold 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 Americas Gold will offset losses from the drop in Americas Gold's long position.The idea behind Nasdaq Inc and Americas Gold and 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.| Americas Gold vs. Pan American Silver | Americas Gold vs. First Majestic Silver | Americas Gold vs. MAG Silver Corp | Americas Gold vs. Silvercorp Metals |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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