Correlation Between Nasdaq and WD 40

Can any of the company-specific risk be diversified away by investing in both Nasdaq and WD 40 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 WD 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq Inc and WD 40 CO, you can compare the effects of market volatilities on Nasdaq and WD 40 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 WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and WD 40.

Diversification Opportunities for Nasdaq and WD 40

0.88

Correlation Coefficient

Nasdaq  WD 40

Very poor diversification

The 3 months correlation between Nasdaq and WD1 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and WD 40 CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 CO 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 WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 CO has no effect on the direction of Nasdaq i.e., Nasdaq and WD 40 go up and down completely randomly.

Pair Corralation between Nasdaq and WD 40

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.11 times more return on investment than WD 40. However, Nasdaq is 1.11 times more volatile than WD 40 CO. It trades about -0.18 of its potential returns per unit of risk. WD 40 CO is currently generating about -0.42 per unit of risk. If you would invest  8,083  in Nasdaq Inc on September 23, 2024 and sell it today you would lose (313.00) from holding Nasdaq Inc or give up 3.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Nasdaq Inc  vs.  WD 40 CO

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) 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.

WD 40 CO

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 CO are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WD 40 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and WD 40

The main advantage of trading using opposite Nasdaq and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.

The idea behind Nasdaq Inc and WD 40 CO 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.