Correlation Between Nasdaq CTA and Global E

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Can any of the company-specific risk be diversified away by investing in both Nasdaq CTA and Global E 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 CTA and Global E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq CTA Artificial and Global E Online, you can compare the effects of market volatilities on Nasdaq CTA and Global E 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 CTA with a short position of Global E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq CTA and Global E.

Diversification Opportunities for Nasdaq CTA and Global E

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nasdaq and Global is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq CTA Artificial and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online and Nasdaq CTA 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 CTA Artificial are associated (or correlated) with Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of Nasdaq CTA i.e., Nasdaq CTA and Global E go up and down completely randomly.
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Pair Corralation between Nasdaq CTA and Global E

Assuming the 90 days trading horizon Nasdaq CTA Artificial is expected to generate 0.36 times more return on investment than Global E. However, Nasdaq CTA Artificial is 2.74 times less risky than Global E. It trades about -0.1 of its potential returns per unit of risk. Global E Online is currently generating about -0.18 per unit of risk. If you would invest  162,562  in Nasdaq CTA Artificial on December 7, 2024 and sell it today you would lose (9,760) from holding Nasdaq CTA Artificial or give up 6.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy93.18%
ValuesDaily Returns

Nasdaq CTA Artificial  vs.  Global E Online

 Performance 
       Timeline  

Nasdaq CTA and Global E Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nasdaq CTA and Global E

The main advantage of trading using opposite Nasdaq CTA and Global E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq CTA position performs unexpectedly, Global E 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 Global E will offset losses from the drop in Global E's long position.
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The idea behind Nasdaq CTA Artificial and Global E Online 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.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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