Correlation Between Nasdaq and Guangdong Electric

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

By analyzing existing cross correlation between Nasdaq Inc and Guangdong Electric Power, you can compare the effects of market volatilities on Nasdaq and Guangdong Electric 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 Guangdong Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Guangdong Electric.

Diversification Opportunities for Nasdaq and Guangdong Electric

-0.07

Correlation Coefficient

Nasdaq  Guangdong Electric

Good diversification

The 3 months correlation between Nasdaq and Guangdong is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Guangdong Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Electric Power 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 Guangdong Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Electric Power has no effect on the direction of Nasdaq i.e., Nasdaq and Guangdong Electric go up and down completely randomly.

Pair Corralation between Nasdaq and Guangdong Electric

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.95 times more return on investment than Guangdong Electric. However, Nasdaq Inc is 1.05 times less risky than Guangdong Electric. It trades about 0.09 of its potential returns per unit of risk. Guangdong Electric Power is currently generating about 0.08 per unit of risk. If you would invest  7,345  in Nasdaq Inc on September 24, 2024 and sell it today you would earn a total of  425.00  from holding Nasdaq Inc or generate 5.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Nasdaq Inc  vs.  Guangdong Electric Power

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Guangdong Electric Power

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Electric Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Guangdong Electric

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

The idea behind Nasdaq Inc and Guangdong Electric Power 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.