Correlation Between Nasdaq and Barings BDC

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

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

Diversification Opportunities for Nasdaq and Barings BDC

0.66

Correlation Coefficient

Nasdaq  Barings BDC

Poor diversification

The 3 months correlation between Nasdaq and Barings is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Barings BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings BDC 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 Barings BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings BDC has no effect on the direction of Nasdaq i.e., Nasdaq and Barings BDC go up and down completely randomly.

Pair Corralation between Nasdaq and Barings BDC

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.07 times more return on investment than Barings BDC. However, Nasdaq is 1.07 times more volatile than Barings BDC. It trades about 0.19 of its potential returns per unit of risk. Barings BDC is currently generating about 0.03 per unit of risk. If you would invest  5,911  in Nasdaq Inc on September 29, 2024 and sell it today you would earn a total of  1,931  from holding Nasdaq Inc or generate 32.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Barings BDC

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nasdaq and Barings BDC

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

The idea behind Nasdaq Inc and Barings BDC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.