Correlation Between Nasdaq and JAPAN EX
Can any of the company-specific risk be diversified away by investing in both Nasdaq and JAPAN EX 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 JAPAN EX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and JAPAN EX UNADR, you can compare the effects of market volatilities on Nasdaq and JAPAN EX 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 JAPAN EX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and JAPAN EX.
Diversification Opportunities for Nasdaq and JAPAN EX
Good diversification
The 3 months correlation between Nasdaq and JAPAN is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and JAPAN EX UNADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN EX UNADR 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 JAPAN EX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN EX UNADR has no effect on the direction of Nasdaq i.e., Nasdaq and JAPAN EX go up and down completely randomly.
Pair Corralation between Nasdaq and JAPAN EX
Assuming the 90 days horizon Nasdaq Inc is expected to generate 0.67 times more return on investment than JAPAN EX. However, Nasdaq Inc is 1.5 times less risky than JAPAN EX. It trades about 0.19 of its potential returns per unit of risk. JAPAN EX UNADR is currently generating about -0.04 per unit of risk. If you would invest 6,504 in Nasdaq Inc on September 26, 2024 and sell it today you would earn a total of 1,053 from holding Nasdaq Inc or generate 16.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Nasdaq Inc vs. JAPAN EX UNADR
Performance |
Timeline |
Nasdaq Inc |
JAPAN EX UNADR |
Nasdaq and JAPAN EX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nasdaq and JAPAN EX
The main advantage of trading using opposite Nasdaq and JAPAN EX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, JAPAN EX 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 JAPAN EX will offset losses from the drop in JAPAN EX's long position.Nasdaq vs. LONDON STEXUNSPADRS12 | Nasdaq vs. Deutsche Brse AG | Nasdaq vs. Cboe Global Markets | Nasdaq vs. ASX LTD UNSPONSADR |
JAPAN EX vs. LONDON STEXUNSPADRS12 | JAPAN EX vs. Deutsche Brse AG | JAPAN EX vs. Nasdaq Inc | JAPAN EX vs. Cboe Global Markets |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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