Correlation Between Nasdaq and ONEOK

Can any of the company-specific risk be diversified away by investing in both Nasdaq and ONEOK 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 ONEOK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq Inc and ONEOK Inc, you can compare the effects of market volatilities on Nasdaq and ONEOK 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 ONEOK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and ONEOK.

Diversification Opportunities for Nasdaq and ONEOK

0.87

Correlation Coefficient

Nasdaq  ONEOK

Very poor diversification

The 3 months correlation between Nasdaq and ONEOK is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Nasdaq i.e., Nasdaq and ONEOK go up and down completely randomly.

Pair Corralation between Nasdaq and ONEOK

Given the investment horizon of 90 days Nasdaq is expected to generate 1.48 times less return on investment than ONEOK. But when comparing it to its historical volatility, Nasdaq Inc is 1.94 times less risky than ONEOK. It trades about 0.08 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,367  in ONEOK Inc on September 22, 2024 and sell it today you would earn a total of  618.00  from holding ONEOK Inc or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Nasdaq Inc  vs.  ONEOK Inc

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ONEOK Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ONEOK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and ONEOK

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

The idea behind Nasdaq Inc and ONEOK Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.