Correlation Between Nasdaq and Copart

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

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

Diversification Opportunities for Nasdaq and Copart

0.89

Correlation Coefficient

Nasdaq  Copart

Very poor diversification

The 3 months correlation between Nasdaq and Copart is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart 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 Copart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copart Inc has no effect on the direction of Nasdaq i.e., Nasdaq and Copart go up and down completely randomly.

Pair Corralation between Nasdaq and Copart

Given the investment horizon of 90 days Nasdaq is expected to generate 3.41 times less return on investment than Copart. But when comparing it to its historical volatility, Nasdaq Inc is 2.28 times less risky than Copart. It trades about 0.09 of its potential returns per unit of risk. Copart Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,637  in Copart Inc on September 24, 2024 and sell it today you would earn a total of  968.00  from holding Copart Inc or generate 20.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Nasdaq Inc  vs.  Copart Inc

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

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.

Copart Inc

Risk-Adjusted Performance

10 of 100

Good

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

Pair Trading with Nasdaq and Copart

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

The idea behind Nasdaq Inc and Copart 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.