Correlation Between Nasdaq and BDO Unibank

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

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

Diversification Opportunities for Nasdaq and BDO Unibank

-0.62

Correlation Coefficient

Nasdaq  BDO Unibank

Excellent diversification

The 3 months correlation between Nasdaq and BDO is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and BDO Unibank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BDO Unibank 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 BDO Unibank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BDO Unibank has no effect on the direction of Nasdaq i.e., Nasdaq and BDO Unibank go up and down completely randomly.

Pair Corralation between Nasdaq and BDO Unibank

Given the investment horizon of 90 days Nasdaq is expected to generate 3.09 times less return on investment than BDO Unibank. But when comparing it to its historical volatility, Nasdaq Inc is 1.97 times less risky than BDO Unibank. It trades about 0.08 of its potential returns per unit of risk. BDO Unibank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14,107  in BDO Unibank on September 14, 2024 and sell it today you would earn a total of  713.00  from holding BDO Unibank or generate 5.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Nasdaq Inc  vs.  BDO Unibank

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) 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.

BDO Unibank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BDO Unibank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, BDO Unibank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nasdaq and BDO Unibank

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

The idea behind Nasdaq Inc and BDO Unibank 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .