Correlation Between Nasdaq and Micro Star

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

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

Diversification Opportunities for Nasdaq and Micro Star

-0.3

Correlation Coefficient

Nasdaq  Micro Star

Very good diversification

The 3 months correlation between Nasdaq and Micro is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Micro Star International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Star Internati 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 Micro Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Star Internati has no effect on the direction of Nasdaq i.e., Nasdaq and Micro Star go up and down completely randomly.

Pair Corralation between Nasdaq and Micro Star

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.65 times more return on investment than Micro Star. However, Nasdaq Inc is 1.54 times less risky than Micro Star. It trades about 0.14 of its potential returns per unit of risk. Micro Star International Co is currently generating about 0.07 per unit of risk. If you would invest  7,239  in Nasdaq Inc on September 27, 2024 and sell it today you would earn a total of  653.00  from holding Nasdaq Inc or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Micro Star International Co

Nasdaq Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 10 (%) 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.

Micro Star Internati

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Star International Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Micro Star may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Micro Star

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

The idea behind Nasdaq Inc and Micro Star International Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.