Correlation Between Nasdaq and Value Capital

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

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

Diversification Opportunities for Nasdaq and Value Capital

-0.19

Correlation Coefficient

Nasdaq  Value Capital

Good diversification

The 3 months correlation between Nasdaq and Value is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Value Capital One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Capital One 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 Value Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Capital One has no effect on the direction of Nasdaq i.e., Nasdaq and Value Capital go up and down completely randomly.

Pair Corralation between Nasdaq and Value Capital

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Value Capital. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 4.09 times less risky than Value Capital. The stock trades about -0.25 of its potential returns per unit of risk. The Value Capital One is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,200  in Value Capital One on September 29, 2024 and sell it today you would lose (40.00) from holding Value Capital One or give up 1.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Nasdaq Inc  vs.  Value Capital One

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) 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.

Value Capital One

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Value Capital One are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Value Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Value Capital

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

The idea behind Nasdaq Inc and Value Capital One 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.