Correlation Between Nasdaq and Fastly

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

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

Diversification Opportunities for Nasdaq and Fastly

0.56

Correlation Coefficient

Nasdaq  Fastly

Very weak diversification

The 3 months correlation between Nasdaq and Fastly is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Fastly Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastly Inc 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 Fastly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastly Inc has no effect on the direction of Nasdaq i.e., Nasdaq and Fastly go up and down completely randomly.

Pair Corralation between Nasdaq and Fastly

Given the investment horizon of 90 days Nasdaq is expected to generate 7.47 times less return on investment than Fastly. But when comparing it to its historical volatility, Nasdaq Inc is 4.24 times less risky than Fastly. It trades about 0.08 of its potential returns per unit of risk. Fastly Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  649.00  in Fastly Inc on September 23, 2024 and sell it today you would earn a total of  278.00  from holding Fastly Inc or generate 42.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Nasdaq Inc  vs.  Fastly Inc

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) 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.

Fastly Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fastly Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fastly unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Fastly

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

The idea behind Nasdaq Inc and Fastly 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.