Correlation Between Nasdaq and Terminal X

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

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

Diversification Opportunities for Nasdaq and Terminal X

0.93

Correlation Coefficient

Nasdaq  Terminal X

Almost no diversification

The 3 months correlation between Nasdaq and Terminal is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Terminal X Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terminal X Online 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 Terminal X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terminal X Online has no effect on the direction of Nasdaq i.e., Nasdaq and Terminal X go up and down completely randomly.

Pair Corralation between Nasdaq and Terminal X

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.51 times more return on investment than Terminal X. However, Nasdaq Inc is 1.95 times less risky than Terminal X. It trades about 0.05 of its potential returns per unit of risk. Terminal X Online is currently generating about 0.01 per unit of risk. If you would invest  5,915  in Nasdaq Inc on September 14, 2024 and sell it today you would earn a total of  2,100  from holding Nasdaq Inc or generate 35.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	77.98%
Values	Daily Returns

Nasdaq Inc  vs.  Terminal X Online

Nasdaq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 12 (%) 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.

Terminal X Online

Risk-Adjusted Performance

45 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Terminal X Online are ranked lower than 45 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Terminal X sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Terminal X

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

The idea behind Nasdaq Inc and Terminal X Online 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.