Correlation Between Nasdaq and Cboe Global

Can any of the company-specific risk be diversified away by investing in both Nasdaq and Cboe 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 Cboe 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 Cboe Global Markets, you can compare the effects of market volatilities on Nasdaq and Cboe 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 Cboe Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Cboe Global.

Diversification Opportunities for Nasdaq and Cboe Global

0.52

Correlation Coefficient

Nasdaq  Cboe Global

Very weak diversification

The 3 months correlation between Nasdaq and Cboe is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Cboe Global Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Global Markets 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 Cboe Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Global Markets has no effect on the direction of Nasdaq i.e., Nasdaq and Cboe Global go up and down completely randomly.

Pair Corralation between Nasdaq and Cboe Global

Assuming the 90 days horizon Nasdaq Inc is expected to generate 1.03 times more return on investment than Cboe Global. However, Nasdaq is 1.03 times more volatile than Cboe Global Markets. It trades about 0.09 of its potential returns per unit of risk. Cboe Global Markets is currently generating about 0.08 per unit of risk. If you would invest  4,693  in Nasdaq Inc on September 25, 2024 and sell it today you would earn a total of  2,864  from holding Nasdaq Inc or generate 61.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.76%
Values	Daily Returns

Nasdaq Inc  vs.  Cboe Global Markets

Nasdaq Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nasdaq reported solid returns over the last few months and may actually be approaching a breakup point.

Cboe Global Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cboe Global Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cboe Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nasdaq and Cboe Global

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

The idea behind Nasdaq Inc and Cboe Global Markets 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.

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.