Correlation Between Nasdaq and LPS Brasil

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

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

Diversification Opportunities for Nasdaq and LPS Brasil

-0.45

Correlation Coefficient

Nasdaq  LPS Brasil

Very good diversification

The 3 months correlation between Nasdaq and LPS is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and LPS Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPS Brasil 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 LPS Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPS Brasil has no effect on the direction of Nasdaq i.e., Nasdaq and LPS Brasil go up and down completely randomly.

Pair Corralation between Nasdaq and LPS Brasil

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.36 times more return on investment than LPS Brasil. However, Nasdaq Inc is 2.74 times less risky than LPS Brasil. It trades about 0.15 of its potential returns per unit of risk. LPS Brasil is currently generating about -0.13 per unit of risk. If you would invest  7,308  in Nasdaq Inc on September 16, 2024 and sell it today you would earn a total of  704.00  from holding Nasdaq Inc or generate 9.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Nasdaq Inc  vs.  LPS Brasil

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) 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.

LPS Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LPS Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Nasdaq and LPS Brasil

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

The idea behind Nasdaq Inc and LPS Brasil 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .