Correlation Between Barings BDC and Nasdaq

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

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

Diversification Opportunities for Barings BDC and Nasdaq

0.68

Correlation Coefficient

Barings BDC  Nasdaq

Poor diversification

The 3 months correlation between Barings and Nasdaq is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Barings BDC 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 Barings BDC are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Barings BDC i.e., Barings BDC and Nasdaq go up and down completely randomly.

Pair Corralation between Barings BDC and Nasdaq

Given the investment horizon of 90 days Barings BDC is expected to generate 0.85 times more return on investment than Nasdaq. However, Barings BDC is 1.18 times less risky than Nasdaq. It trades about 0.06 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.04 per unit of risk. If you would invest  694.00  in Barings BDC on October 10, 2024 and sell it today you would earn a total of  248.00  from holding Barings BDC or generate 35.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Barings BDC  vs.  Nasdaq Inc

Barings BDC

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nasdaq Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 8 (%) 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 February 2025.

Pair Trading with Barings BDC and Nasdaq

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

The idea behind Barings BDC and Nasdaq Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.