Correlation Between Nasdaq and VBC

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

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

Diversification Opportunities for Nasdaq and VBC

0.39

Correlation Coefficient

Nasdaq  VBC

Weak diversification

The 3 months correlation between Nasdaq and VBC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and VBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VBC 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 VBC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VBC has no effect on the direction of Nasdaq i.e., Nasdaq and VBC go up and down completely randomly.

Pair Corralation between Nasdaq and VBC

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the VBC. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.43 times less risky than VBC. The stock trades about -0.26 of its potential returns per unit of risk. The VBC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,010,000  in VBC on September 29, 2024 and sell it today you would earn a total of  10,000  from holding VBC or generate 0.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

Nasdaq Inc  vs.  VBC

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

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.

VBC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VBC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, VBC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and VBC

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

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