Correlation Between NASDAQ TEST and Big 5

Can any of the company-specific risk be diversified away by investing in both NASDAQ TEST and Big 5 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 TEST and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NASDAQ TEST STOCK and Big 5 Sporting, you can compare the effects of market volatilities on NASDAQ TEST and Big 5 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 TEST with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of NASDAQ TEST and Big 5.

Diversification Opportunities for NASDAQ TEST and Big 5

0.04

Correlation Coefficient

NASDAQ TEST  Big 5

Significant diversification

The 3 months correlation between NASDAQ and Big is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NASDAQ TEST STOCK and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and NASDAQ TEST 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 TEST STOCK are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of NASDAQ TEST i.e., NASDAQ TEST and Big 5 go up and down completely randomly.

Pair Corralation between NASDAQ TEST and Big 5

Assuming the 90 days horizon NASDAQ TEST is expected to generate 13.2 times less return on investment than Big 5. In addition to that, NASDAQ TEST is 1.4 times more volatile than Big 5 Sporting. It trades about 0.01 of its total potential returns per unit of risk. Big 5 Sporting is currently generating about 0.12 per unit of volatility. If you would invest  90.00  in Big 5 Sporting on May 7, 2025 and sell it today you would earn a total of  51.00  from holding Big 5 Sporting or generate 56.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	83.87%
Values	Daily Returns

NASDAQ TEST STOCK  vs.  Big 5 Sporting

NASDAQ TEST STOCK

Risk-Adjusted Performance

Weakest

Over the last 90 days NASDAQ TEST STOCK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NASDAQ TEST is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Big 5 Sporting

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Big 5 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NASDAQ TEST and Big 5

The main advantage of trading using opposite NASDAQ TEST and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NASDAQ TEST position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind NASDAQ TEST STOCK and Big 5 Sporting 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 Global Correlations module to find global opportunities by holding instruments from different markets.