Correlation Between Nasdaq and VGS

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

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

Diversification Opportunities for Nasdaq and VGS

-0.87

Correlation Coefficient

Nasdaq  VGS

Pay attention - limited upside

The 3 months correlation between Nasdaq and VGS is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and VGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VGS 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 VGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VGS has no effect on the direction of Nasdaq i.e., Nasdaq and VGS go up and down completely randomly.

Pair Corralation between Nasdaq and VGS

Given the investment horizon of 90 days Nasdaq is expected to generate 4.58 times less return on investment than VGS. But when comparing it to its historical volatility, Nasdaq Inc is 2.3 times less risky than VGS. It trades about 0.04 of its potential returns per unit of risk. VGS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,021,645  in VGS on September 30, 2024 and sell it today you would earn a total of  2,148,355  from holding VGS or generate 210.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Nasdaq Inc  vs.  VGS

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.

VGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nasdaq and VGS

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

The idea behind Nasdaq Inc and VGS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.