Correlation Between Nasdaq and NEO PERFORMMAT

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

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

Diversification Opportunities for Nasdaq and NEO PERFORMMAT

0.37

Correlation Coefficient

Nasdaq  NEO PERFORMMAT

Weak diversification

The 3 months correlation between Nasdaq and NEO is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and NEO PERFORMMAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEO PERFORMMAT 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 NEO PERFORMMAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEO PERFORMMAT has no effect on the direction of Nasdaq i.e., Nasdaq and NEO PERFORMMAT go up and down completely randomly.

Pair Corralation between Nasdaq and NEO PERFORMMAT

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.46 times more return on investment than NEO PERFORMMAT. However, Nasdaq Inc is 2.19 times less risky than NEO PERFORMMAT. It trades about 0.04 of its potential returns per unit of risk. NEO PERFORMMAT is currently generating about 0.01 per unit of risk. If you would invest  5,991  in Nasdaq Inc on September 21, 2024 and sell it today you would earn a total of  1,747  from holding Nasdaq Inc or generate 29.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.02%
Values	Daily Returns

Nasdaq Inc  vs.  NEO PERFORMMAT

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.

NEO PERFORMMAT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NEO PERFORMMAT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NEO PERFORMMAT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and NEO PERFORMMAT

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

The idea behind Nasdaq Inc and NEO PERFORMMAT 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.