Correlation Between Nasdaq and Vanguard LifeStrategy

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

By analyzing existing cross correlation between Nasdaq Inc and Vanguard LifeStrategy 20, you can compare the effects of market volatilities on Nasdaq and Vanguard LifeStrategy 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 Vanguard LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Vanguard LifeStrategy.

Diversification Opportunities for Nasdaq and Vanguard LifeStrategy

0.14

Correlation Coefficient

Nasdaq  Vanguard LifeStrategy

Average diversification

The 3 months correlation between Nasdaq and Vanguard is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Vanguard LifeStrategy 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy 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 Vanguard LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of Nasdaq i.e., Nasdaq and Vanguard LifeStrategy go up and down completely randomly.

Pair Corralation between Nasdaq and Vanguard LifeStrategy

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 3.05 times more return on investment than Vanguard LifeStrategy. However, Nasdaq is 3.05 times more volatile than Vanguard LifeStrategy 20. It trades about 0.08 of its potential returns per unit of risk. Vanguard LifeStrategy 20 is currently generating about 0.01 per unit of risk. If you would invest  7,379  in Nasdaq Inc on September 21, 2024 and sell it today you would earn a total of  391.00  from holding Nasdaq Inc or generate 5.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Nasdaq Inc  vs.  Vanguard LifeStrategy 20

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.

Vanguard LifeStrategy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard LifeStrategy 20 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard LifeStrategy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nasdaq and Vanguard LifeStrategy

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

The idea behind Nasdaq Inc and Vanguard LifeStrategy 20 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.