Correlation Between Nasdaq and SP Global
Can any of the company-specific risk be diversified away by investing in both Nasdaq and SP Global 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 SP Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and SP Global, you can compare the effects of market volatilities on Nasdaq and SP Global 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 SP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and SP Global.
Diversification Opportunities for Nasdaq and SP Global
Poor diversification
The 3 months correlation between Nasdaq and SPGI34 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of Nasdaq i.e., Nasdaq and SP Global go up and down completely randomly.
Pair Corralation between Nasdaq and SP Global
Assuming the 90 days trading horizon Nasdaq is expected to generate 1.25 times less return on investment than SP Global. But when comparing it to its historical volatility, Nasdaq Inc is 1.02 times less risky than SP Global. It trades about 0.07 of its potential returns per unit of risk. SP Global is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,845 in SP Global on September 13, 2024 and sell it today you would earn a total of 3,723 from holding SP Global or generate 76.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Nasdaq Inc vs. SP Global
Performance |
| Timeline |
| Nasdaq Inc |
| SP Global |
Nasdaq and SP Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and SP Global
The main advantage of trading using opposite Nasdaq and SP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, SP Global 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 SP Global will offset losses from the drop in SP Global's long position.| Nasdaq vs. Bemobi Mobile Tech | Nasdaq vs. Marvell Technology | Nasdaq vs. Micron Technology | Nasdaq vs. Take Two Interactive Software |
| SP Global vs. MSCI Inc | SP Global vs. B3 SA | SP Global vs. Energisa SA | SP Global vs. BTG Pactual Logstica |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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