Correlation Between Nasdaq and Multimanager Lifestyle

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

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

Diversification Opportunities for Nasdaq and Multimanager Lifestyle

0.7

Correlation Coefficient

Nasdaq  Multimanager Lifestyle

Poor diversification

The 3 months correlation between Nasdaq and Multimanager is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Nasdaq i.e., Nasdaq and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Nasdaq and Multimanager Lifestyle

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.55 times more return on investment than Multimanager Lifestyle. However, Nasdaq is 1.55 times more volatile than Multimanager Lifestyle Aggressive. It trades about 0.11 of its potential returns per unit of risk. Multimanager Lifestyle Aggressive is currently generating about -0.03 per unit of risk. If you would invest  7,407  in Nasdaq Inc on September 22, 2024 and sell it today you would earn a total of  363.00  from holding Nasdaq Inc or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

Nasdaq Inc  vs.  Multimanager Lifestyle Aggress

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) 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.

Multimanager Lifestyle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multimanager Lifestyle Aggressive has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Multimanager Lifestyle

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

The idea behind Nasdaq Inc and Multimanager Lifestyle Aggressive 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.