Correlation Between Nasdaq and BZAM

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

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

Diversification Opportunities for Nasdaq and BZAM

-0.61

Correlation Coefficient

Nasdaq  BZAM

Excellent diversification

The 3 months correlation between Nasdaq and BZAM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Nasdaq i.e., Nasdaq and BZAM go up and down completely randomly.

Pair Corralation between Nasdaq and BZAM

Given the investment horizon of 90 days Nasdaq is expected to generate 256.14 times less return on investment than BZAM. But when comparing it to its historical volatility, Nasdaq Inc is 178.05 times less risky than BZAM. It trades about 0.09 of its potential returns per unit of risk. BZAM is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.10  in BZAM on September 24, 2024 and sell it today you would lose (1.10) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Nasdaq Inc  vs.  BZAM

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) 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.

BZAM

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and BZAM

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

The idea behind Nasdaq Inc and BZAM 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.