Correlation Between Nasdaq and Battery Future
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Battery Future 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 Battery Future into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Battery Future Acquisition, you can compare the effects of market volatilities on Nasdaq and Battery Future 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 Battery Future. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Battery Future.
Diversification Opportunities for Nasdaq and Battery Future
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Battery is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Battery Future Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battery Future Acqui 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 Battery Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battery Future Acqui has no effect on the direction of Nasdaq i.e., Nasdaq and Battery Future go up and down completely randomly.
Pair Corralation between Nasdaq and Battery Future
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 3.46 times more return on investment than Battery Future. However, Nasdaq is 3.46 times more volatile than Battery Future Acquisition. It trades about 0.17 of its potential returns per unit of risk. Battery Future Acquisition is currently generating about 0.13 per unit of risk. If you would invest 7,268 in Nasdaq Inc on September 18, 2024 and sell it today you would earn a total of 778.00 from holding Nasdaq Inc or generate 10.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Battery Future Acquisition
Performance |
| Timeline |
| Nasdaq Inc |
| Battery Future Acqui |
Nasdaq and Battery Future Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Battery Future
The main advantage of trading using opposite Nasdaq and Battery Future positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Battery Future 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 Battery Future will offset losses from the drop in Battery Future's long position.The idea behind Nasdaq Inc and Battery Future Acquisition 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.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Battery Future as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Battery Future's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Battery Future's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Battery Future Acquisition.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |