Correlation Between Nasdaq and TravelCenters

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

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

Diversification Opportunities for Nasdaq and TravelCenters

0.8

Correlation Coefficient

Nasdaq  TravelCenters

Very poor diversification

The 3 months correlation between Nasdaq and TravelCenters is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and TravelCenters Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TravelCenters Of America 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 TravelCenters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TravelCenters Of America has no effect on the direction of Nasdaq i.e., Nasdaq and TravelCenters go up and down completely randomly.

Pair Corralation between Nasdaq and TravelCenters

If you would invest  7,268  in Nasdaq Inc on September 18, 2024 and sell it today you would earn a total of  778.00  from holding Nasdaq Inc or generate 10.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Nasdaq Inc  vs.  TravelCenters Of America

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) 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.

TravelCenters Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TravelCenters Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, TravelCenters is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nasdaq and TravelCenters

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

The idea behind Nasdaq Inc and TravelCenters Of America 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.