Correlation Between Nasdaq and Southern Steel

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

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

Diversification Opportunities for Nasdaq and Southern Steel

0.65

Correlation Coefficient

Nasdaq  Southern Steel

Poor diversification

The 3 months correlation between Nasdaq and Southern is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Southern Steel Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Steel Bhd 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 Southern Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Steel Bhd has no effect on the direction of Nasdaq i.e., Nasdaq and Southern Steel go up and down completely randomly.

Pair Corralation between Nasdaq and Southern Steel

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.39 times more return on investment than Southern Steel. However, Nasdaq Inc is 2.58 times less risky than Southern Steel. It trades about 0.17 of its potential returns per unit of risk. Southern Steel Bhd is currently generating about -0.02 per unit of risk. If you would invest  5,972  in Nasdaq Inc on September 22, 2024 and sell it today you would earn a total of  1,766  from holding Nasdaq Inc or generate 29.57% return on investment over 90 days.

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

Nasdaq Inc  vs.  Southern Steel Bhd

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.

Southern Steel Bhd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Steel Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Southern Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nasdaq and Southern Steel

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

The idea behind Nasdaq Inc and Southern Steel Bhd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.