Correlation Between Nasdaq and IShares IV

Can any of the company-specific risk be diversified away by investing in both Nasdaq and IShares IV 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 IV 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 IV Public, you can compare the effects of market volatilities on Nasdaq and IShares IV 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 IV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and IShares IV.

Diversification Opportunities for Nasdaq and IShares IV

-0.43

Correlation Coefficient

Nasdaq  IShares IV

Very good diversification

The 3 months correlation between Nasdaq and IShares is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and iShares IV Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares IV Public 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 IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares IV Public has no effect on the direction of Nasdaq i.e., Nasdaq and IShares IV go up and down completely randomly.

Pair Corralation between Nasdaq and IShares IV

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the IShares IV. In addition to that, Nasdaq is 1.82 times more volatile than iShares IV Public. It trades about -0.13 of its total potential returns per unit of risk. iShares IV Public is currently generating about -0.13 per unit of volatility. If you would invest  519.00  in iShares IV Public on September 26, 2024 and sell it today you would lose (8.00) from holding iShares IV Public or give up 1.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  iShares IV Public

Nasdaq Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 10 (%) 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.

iShares IV Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares IV Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares IV is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nasdaq and IShares IV

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

The idea behind Nasdaq Inc and iShares IV Public 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.