Correlation Between Nasdaq and Galapagos

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

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

Diversification Opportunities for Nasdaq and Galapagos

-0.45

Correlation Coefficient

Nasdaq  Galapagos

Very good diversification

The 3 months correlation between Nasdaq and Galapagos is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Galapagos NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galapagos NV 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 Galapagos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galapagos NV has no effect on the direction of Nasdaq i.e., Nasdaq and Galapagos go up and down completely randomly.

Pair Corralation between Nasdaq and Galapagos

Given the investment horizon of 90 days Nasdaq is expected to generate 1.13 times less return on investment than Galapagos. But when comparing it to its historical volatility, Nasdaq Inc is 2.31 times less risky than Galapagos. It trades about 0.01 of its potential returns per unit of risk. Galapagos NV is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,556  in Galapagos NV on September 19, 2024 and sell it today you would lose (6.00) from holding Galapagos NV or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Nasdaq Inc  vs.  Galapagos NV

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

Good

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.

Galapagos NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galapagos NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Galapagos is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nasdaq and Galapagos

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

The idea behind Nasdaq Inc and Galapagos NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.