Correlation Between Nasdaq and Golden Ridge

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

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

Diversification Opportunities for Nasdaq and Golden Ridge

0.0

Correlation Coefficient

Nasdaq  Golden Ridge

Pay attention - limited upside

The 3 months correlation between Nasdaq and Golden is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Golden Ridge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ridge Resources 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 Golden Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ridge Resources has no effect on the direction of Nasdaq i.e., Nasdaq and Golden Ridge go up and down completely randomly.

Pair Corralation between Nasdaq and Golden Ridge

Given the investment horizon of 90 days Nasdaq is expected to generate 1.7 times less return on investment than Golden Ridge. But when comparing it to its historical volatility, Nasdaq Inc is 4.49 times less risky than Golden Ridge. It trades about 0.06 of its potential returns per unit of risk. Golden Ridge Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Golden Ridge Resources on September 26, 2024 and sell it today you would lose (2.00) from holding Golden Ridge Resources or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Golden Ridge Resources

Nasdaq Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 10 (%) 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.

Golden Ridge Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Ridge Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Golden Ridge is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nasdaq and Golden Ridge

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

The idea behind Nasdaq Inc and Golden Ridge Resources 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.