Correlation Between Nasdaq and CITGO

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

By analyzing existing cross correlation between Nasdaq Inc and CITGO Petroleum 7, you can compare the effects of market volatilities on Nasdaq and CITGO 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 CITGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and CITGO.

Diversification Opportunities for Nasdaq and CITGO

0.22

Correlation Coefficient

Nasdaq  CITGO

Modest diversification

The 3 months correlation between Nasdaq and CITGO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and CITGO Petroleum 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITGO Petroleum 7 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 CITGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITGO Petroleum 7 has no effect on the direction of Nasdaq i.e., Nasdaq and CITGO go up and down completely randomly.

Pair Corralation between Nasdaq and CITGO

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 6.04 times more return on investment than CITGO. However, Nasdaq is 6.04 times more volatile than CITGO Petroleum 7. It trades about 0.09 of its potential returns per unit of risk. CITGO Petroleum 7 is currently generating about -0.01 per unit of risk. If you would invest  7,345  in Nasdaq Inc on September 24, 2024 and sell it today you would earn a total of  423.50  from holding Nasdaq Inc or generate 5.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	69.23%
Values	Daily Returns

Nasdaq Inc  vs.  CITGO Petroleum 7

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.

CITGO Petroleum 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITGO Petroleum 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITGO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and CITGO

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

The idea behind Nasdaq Inc and CITGO Petroleum 7 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.