Correlation Between Nasdaq and Nuveen NASDAQ

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

By analyzing existing cross correlation between Nasdaq Inc and Nuveen NASDAQ 100, you can compare the effects of market volatilities on Nasdaq and Nuveen NASDAQ 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 Nuveen NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Nuveen NASDAQ.

Diversification Opportunities for Nasdaq and Nuveen NASDAQ

0.83

Correlation Coefficient

Nasdaq  Nuveen NASDAQ

Very poor diversification

The 3 months correlation between Nasdaq and Nuveen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Nuveen NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen NASDAQ 100 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 Nuveen NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen NASDAQ 100 has no effect on the direction of Nasdaq i.e., Nasdaq and Nuveen NASDAQ go up and down completely randomly.

Pair Corralation between Nasdaq and Nuveen NASDAQ

Given the investment horizon of 90 days Nasdaq is expected to generate 1.3 times less return on investment than Nuveen NASDAQ. In addition to that, Nasdaq is 1.36 times more volatile than Nuveen NASDAQ 100. It trades about 0.05 of its total potential returns per unit of risk. Nuveen NASDAQ 100 is currently generating about 0.08 per unit of volatility. If you would invest  1,817  in Nuveen NASDAQ 100 on September 22, 2024 and sell it today you would earn a total of  824.00  from holding Nuveen NASDAQ 100 or generate 45.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Nasdaq Inc  vs.  Nuveen NASDAQ 100

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.

Nuveen NASDAQ 100

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen NASDAQ 100 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nuveen NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Nuveen NASDAQ

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

The idea behind Nasdaq Inc and Nuveen NASDAQ 100 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.