Correlation Between Nasdaq and Boston Properties
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Boston Properties 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 Boston Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Boston Properties, you can compare the effects of market volatilities on Nasdaq and Boston Properties 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 Boston Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Boston Properties.
Diversification Opportunities for Nasdaq and Boston Properties
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nasdaq and Boston is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties 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 Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Nasdaq i.e., Nasdaq and Boston Properties go up and down completely randomly.
Pair Corralation between Nasdaq and Boston Properties
Given the investment horizon of 90 days Nasdaq is expected to generate 1.1 times less return on investment than Boston Properties. But when comparing it to its historical volatility, Nasdaq Inc is 1.71 times less risky than Boston Properties. It trades about 0.05 of its potential returns per unit of risk. Boston Properties is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,373 in Boston Properties on September 3, 2024 and sell it today you would earn a total of 1,826 from holding Boston Properties or generate 28.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Boston Properties
Performance |
| Timeline |
| Nasdaq Inc |
| Boston Properties |
Nasdaq and Boston Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Boston Properties
The main advantage of trading using opposite Nasdaq and Boston Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Boston Properties 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 Boston Properties will offset losses from the drop in Boston Properties' long position.The idea behind Nasdaq Inc and Boston Properties 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.| Boston Properties vs. Office Properties Income | Boston Properties vs. SL Green Realty | Boston Properties vs. Highwoods Properties | Boston Properties vs. Equity Commonwealth |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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