Correlation Between Veeco Instrument and Nasdaq

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Can any of the company-specific risk be diversified away by investing in both Veeco Instrument and Nasdaq 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 Veeco Instrument and Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Veeco Instrument and Nasdaq, you can compare the effects of market volatilities on Veeco Instrument and Nasdaq 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 Veeco Instrument with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veeco Instrument and Nasdaq.

Diversification Opportunities for Veeco Instrument and Nasdaq

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Veeco and Nasdaq is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Veeco Instrument and Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq and Veeco Instrument 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 Veeco Instrument are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq has no effect on the direction of Veeco Instrument i.e., Veeco Instrument and Nasdaq go up and down completely randomly.
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Pair Corralation between Veeco Instrument and Nasdaq

Given the investment horizon of 90 days Veeco Instrument is expected to under-perform the Nasdaq. In addition to that, Veeco Instrument is 1.19 times more volatile than Nasdaq. It trades about -0.08 of its total potential returns per unit of risk. Nasdaq is currently generating about -0.01 per unit of volatility. If you would invest  1,174,065  in Nasdaq on March 27, 2022 and sell it today you would lose (13,303)  from holding Nasdaq or give up 1.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Veeco Instrument  vs.  Nasdaq

 Performance (%) 
      Timeline 

Veeco Instrument and Nasdaq Volatility Contrast

 Predicted Return Density 
      Returns 

Veeco Instrument

Pair trading matchups for Veeco Instrument

Nasdaq

Pair trading matchups for Nasdaq

SP 500 vs. Nasdaq
Microchip Technology vs. Nasdaq
BERKSHIRE HATHAWAY vs. Nasdaq
Infineon Tech vs. Nasdaq
Upstart Holdings vs. Nasdaq
CalAmp Corp vs. Nasdaq
Quantumscape Corp vs. Nasdaq
Envirotech Vehicles vs. Nasdaq
SP 500 vs. Nasdaq
Li-Cycle Holdings vs. Nasdaq
Ally Financial vs. Nasdaq
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Nasdaq as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Nasdaq's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Nasdaq's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Nasdaq.

Pair Trading with Veeco Instrument and Nasdaq

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

Veeco Instrument

Pair trading matchups for Veeco Instrument

The idea behind Veeco Instrument and Nasdaq 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.

Nasdaq

Pair trading matchups for Nasdaq

SP 500 vs. Nasdaq
DB Commodity vs. Nasdaq
Vaneck Oil vs. Nasdaq
Li-Cycle Holdings vs. Nasdaq
Envirotech Vehicles vs. Nasdaq
Kar Auction vs. Nasdaq
Upstart Holdings vs. Nasdaq
Coinbase Global vs. Nasdaq
Stealthgas vs. Nasdaq
Infineon Tech vs. Nasdaq
CalAmp Corp vs. Nasdaq
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Nasdaq as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Nasdaq's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Nasdaq's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Nasdaq.
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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