Correlation Between Nasdaq and KUAISHOU TECHNOLOGY

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

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

Diversification Opportunities for Nasdaq and KUAISHOU TECHNOLOGY

-0.07

Correlation Coefficient

Nasdaq  KUAISHOU TECHNOLOGY

Good diversification

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

Pair Corralation between Nasdaq and KUAISHOU TECHNOLOGY

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.44 times more return on investment than KUAISHOU TECHNOLOGY. However, Nasdaq Inc is 2.26 times less risky than KUAISHOU TECHNOLOGY. It trades about 0.05 of its potential returns per unit of risk. KUAISHOU TECHNOLOGY CLB is currently generating about -0.01 per unit of risk. If you would invest  5,991  in Nasdaq Inc on September 23, 2024 and sell it today you would earn a total of  1,779  from holding Nasdaq Inc or generate 29.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.03%
Values	Daily Returns

Nasdaq Inc  vs.  KUAISHOU TECHNOLOGY CLB

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.

KUAISHOU TECHNOLOGY CLB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KUAISHOU TECHNOLOGY CLB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KUAISHOU TECHNOLOGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and KUAISHOU TECHNOLOGY

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

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