Correlation Between Nasdaq and TC Energy

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

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

Diversification Opportunities for Nasdaq and TC Energy

0.79

Correlation Coefficient

Nasdaq  TC Energy

Poor diversification

The 3 months correlation between Nasdaq and TRP-PA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Nasdaq i.e., Nasdaq and TC Energy go up and down completely randomly.

Pair Corralation between Nasdaq and TC Energy

Given the investment horizon of 90 days Nasdaq is expected to generate 1.17 times less return on investment than TC Energy. In addition to that, Nasdaq is 1.2 times more volatile than TC Energy Corp. It trades about 0.05 of its total potential returns per unit of risk. TC Energy Corp is currently generating about 0.07 per unit of volatility. If you would invest  1,262  in TC Energy Corp on September 25, 2024 and sell it today you would earn a total of  528.00  from holding TC Energy Corp or generate 41.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Nasdaq Inc  vs.  TC Energy Corp

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.

TC Energy Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and TC Energy

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

The idea behind Nasdaq Inc and TC Energy Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.