Correlation Between Nasdaq and TWZ Public

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

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

Diversification Opportunities for Nasdaq and TWZ Public

-0.5

Correlation Coefficient

Nasdaq  TWZ Public

Very good diversification

The 3 months correlation between Nasdaq and TWZ is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and TWZ Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWZ Public 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 TWZ Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWZ Public has no effect on the direction of Nasdaq i.e., Nasdaq and TWZ Public go up and down completely randomly.

Pair Corralation between Nasdaq and TWZ Public

Given the investment horizon of 90 days Nasdaq is expected to generate 12.24 times less return on investment than TWZ Public. But when comparing it to its historical volatility, Nasdaq Inc is 18.77 times less risky than TWZ Public. It trades about 0.17 of its potential returns per unit of risk. TWZ Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3.00  in TWZ Public on September 14, 2024 and sell it today you would earn a total of  1.00  from holding TWZ Public or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Nasdaq Inc  vs.  TWZ Public

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.

TWZ Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TWZ Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, TWZ Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and TWZ Public

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

The idea behind Nasdaq Inc and TWZ Public 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.