Correlation Between SP Global and Nasdaq
Can any of the company-specific risk be diversified away by investing in both SP Global 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 SP Global and Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP Global and Nasdaq Inc, you can compare the effects of market volatilities on SP Global 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 SP Global with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Global and Nasdaq.
Diversification Opportunities for SP Global and Nasdaq
Almost no diversification
The 3 months correlation between SPGI and Nasdaq is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and SP Global 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 SP Global 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 Inc has no effect on the direction of SP Global i.e., SP Global and Nasdaq go up and down completely randomly.
Pair Corralation between SP Global and Nasdaq
Given the investment horizon of 90 days SP Global is expected to generate 1.28 times less return on investment than Nasdaq. But when comparing it to its historical volatility, SP Global is 1.1 times less risky than Nasdaq. It trades about 0.14 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,410 in Nasdaq Inc on November 1, 2024 and sell it today you would earn a total of 819.00 from holding Nasdaq Inc or generate 11.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP Global vs. Nasdaq Inc
Performance |
| Timeline |
| SP Global |
| Nasdaq Inc |
SP Global and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP Global and Nasdaq
The main advantage of trading using opposite SP Global and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Global 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.| SP Global vs. MSCI Inc | SP Global vs. Nasdaq Inc | SP Global vs. Intercontinental Exchange | SP Global vs. CME Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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