Correlation Between Nasdaq and UNICHARM

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

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

Diversification Opportunities for Nasdaq and UNICHARM

-0.93

Correlation Coefficient

Nasdaq  UNICHARM

Pay attention - limited upside

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

Pair Corralation between Nasdaq and UNICHARM

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the UNICHARM. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.52 times less risky than UNICHARM. The stock trades about -0.19 of its potential returns per unit of risk. The UNICHARM is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,440  in UNICHARM on September 24, 2024 and sell it today you would lose (40.00) from holding UNICHARM or give up 1.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  UNICHARM

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

UNICHARM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNICHARM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nasdaq and UNICHARM

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

The idea behind Nasdaq Inc and UNICHARM 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.