Correlation Between Nasdaq and IShares Thematic
Can any of the company-specific risk be diversified away by investing in both Nasdaq and IShares Thematic 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 IShares Thematic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and iShares Thematic Rotation, you can compare the effects of market volatilities on Nasdaq and IShares Thematic 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 IShares Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and IShares Thematic.
Diversification Opportunities for Nasdaq and IShares Thematic
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and iShares Thematic Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Thematic Rotation 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 IShares Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Thematic Rotation has no effect on the direction of Nasdaq i.e., Nasdaq and IShares Thematic go up and down completely randomly.
Pair Corralation between Nasdaq and IShares Thematic
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.28 times more return on investment than IShares Thematic. However, Nasdaq is 1.28 times more volatile than iShares Thematic Rotation. It trades about 0.14 of its potential returns per unit of risk. iShares Thematic Rotation is currently generating about 0.15 per unit of risk. If you would invest 5,461 in Nasdaq Inc on September 12, 2024 and sell it today you would earn a total of 2,673 from holding Nasdaq Inc or generate 48.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. iShares Thematic Rotation
Performance |
| Timeline |
| Nasdaq Inc |
| iShares Thematic Rotation |
Nasdaq and IShares Thematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and IShares Thematic
The main advantage of trading using opposite Nasdaq and IShares Thematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, IShares Thematic 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 IShares Thematic will offset losses from the drop in IShares Thematic's long position.The idea behind Nasdaq Inc and iShares Thematic Rotation 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.| IShares Thematic vs. Vanguard SP 500 | IShares Thematic vs. Vanguard Real Estate | IShares Thematic vs. Vanguard Total Bond | IShares Thematic vs. Vanguard High Dividend |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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