Correlation Between Nasdaq and National Aerospace

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

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

Diversification Opportunities for Nasdaq and National Aerospace

-0.13

Correlation Coefficient

Nasdaq  National Aerospace

Good diversification

The 3 months correlation between Nasdaq and National is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and National Aerospace Fasteners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Aerospace 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 National Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Aerospace has no effect on the direction of Nasdaq i.e., Nasdaq and National Aerospace go up and down completely randomly.

Pair Corralation between Nasdaq and National Aerospace

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.86 times more return on investment than National Aerospace. However, Nasdaq Inc is 1.16 times less risky than National Aerospace. It trades about 0.12 of its potential returns per unit of risk. National Aerospace Fasteners is currently generating about -0.05 per unit of risk. If you would invest  7,369  in Nasdaq Inc on September 23, 2024 and sell it today you would earn a total of  401.00  from holding Nasdaq Inc or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Nasdaq Inc  vs.  National Aerospace Fasteners

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.

National Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Aerospace Fasteners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, National Aerospace is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nasdaq and National Aerospace

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

The idea behind Nasdaq Inc and National Aerospace Fasteners 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.