Correlation Between Nasdaq and Warehouses
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Warehouses 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 Warehouses into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Warehouses De Pauw, you can compare the effects of market volatilities on Nasdaq and Warehouses 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 Warehouses. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Warehouses.
Diversification Opportunities for Nasdaq and Warehouses
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nasdaq and Warehouses is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Warehouses De Pauw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouses De Pauw 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 Warehouses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouses De Pauw has no effect on the direction of Nasdaq i.e., Nasdaq and Warehouses go up and down completely randomly.
Pair Corralation between Nasdaq and Warehouses
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.74 times more return on investment than Warehouses. However, Nasdaq Inc is 1.35 times less risky than Warehouses. It trades about 0.08 of its potential returns per unit of risk. Warehouses De Pauw is currently generating about -0.09 per unit of risk. If you would invest 7,963 in Nasdaq Inc on September 14, 2024 and sell it today you would earn a total of 124.00 from holding Nasdaq Inc or generate 1.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nasdaq Inc vs. Warehouses De Pauw
Performance |
| Timeline |
| Nasdaq Inc |
| Warehouses De Pauw |
Nasdaq and Warehouses Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Warehouses
The main advantage of trading using opposite Nasdaq and Warehouses positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Warehouses 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 Warehouses will offset losses from the drop in Warehouses' long position.The idea behind Nasdaq Inc and Warehouses De Pauw 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.| Warehouses vs. Extra Space Storage | Warehouses vs. REXFORD INDREALTY DL 01 | Warehouses vs. CubeSmart | Warehouses vs. First Industrial Realty |
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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