Correlation Between AW Revenue and Nasdaq

Can any of the company-specific risk be diversified away by investing in both AW Revenue and Nasdaq 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 AW Revenue and Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AW Revenue Royalties and Nasdaq Inc, you can compare the effects of market volatilities on AW Revenue and Nasdaq 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 AW Revenue with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of AW Revenue and Nasdaq.

Diversification Opportunities for AW Revenue and Nasdaq

0.6

Correlation Coefficient

AW Revenue  Nasdaq

Poor diversification

The 3 months correlation between AWRRF and Nasdaq is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AW Revenue Royalties and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and AW Revenue 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 AW Revenue Royalties are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of AW Revenue i.e., AW Revenue and Nasdaq go up and down completely randomly.

Pair Corralation between AW Revenue and Nasdaq

Assuming the 90 days horizon AW Revenue Royalties is expected to generate 0.8 times more return on investment than Nasdaq. However, AW Revenue Royalties is 1.26 times less risky than Nasdaq. It trades about 0.25 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.18 per unit of risk. If you would invest  2,525  in AW Revenue Royalties on September 4, 2024 and sell it today you would earn a total of  151.00  from holding AW Revenue Royalties or generate 5.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	48.44%
Values	Daily Returns

AW Revenue Royalties  vs.  Nasdaq Inc

AW Revenue Royalties

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days AW Revenue Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, AW Revenue may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nasdaq Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AW Revenue and Nasdaq

The main advantage of trading using opposite AW Revenue and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AW Revenue position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.

The idea behind AW Revenue Royalties and Nasdaq Inc 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.