Correlation Between Nasdaq and IShares BRIC

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

By analyzing existing cross correlation between Nasdaq Inc and iShares BRIC 50, you can compare the effects of market volatilities on Nasdaq and IShares BRIC 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 IShares BRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and IShares BRIC.

Diversification Opportunities for Nasdaq and IShares BRIC

-0.52

Correlation Coefficient

Nasdaq  IShares BRIC

Excellent diversification

The 3 months correlation between Nasdaq and IShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and iShares BRIC 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BRIC 50 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 IShares BRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BRIC 50 has no effect on the direction of Nasdaq i.e., Nasdaq and IShares BRIC go up and down completely randomly.

Pair Corralation between Nasdaq and IShares BRIC

Given the investment horizon of 90 days Nasdaq is expected to generate 2.14 times less return on investment than IShares BRIC. But when comparing it to its historical volatility, Nasdaq Inc is 2.26 times less risky than IShares BRIC. It trades about 0.08 of its potential returns per unit of risk. iShares BRIC 50 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,755  in iShares BRIC 50 on September 23, 2024 and sell it today you would earn a total of  189.00  from holding iShares BRIC 50 or generate 10.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Nasdaq Inc  vs.  iShares BRIC 50

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.

iShares BRIC 50

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares BRIC 50 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares BRIC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and IShares BRIC

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

The idea behind Nasdaq Inc and iShares BRIC 50 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.