Correlation Between Nasdaq and Fubon NIFTY

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

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

Diversification Opportunities for Nasdaq and Fubon NIFTY

-0.67

Correlation Coefficient

Nasdaq  Fubon NIFTY

Excellent diversification

The 3 months correlation between Nasdaq and Fubon is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Fubon NIFTY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon NIFTY 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 Fubon NIFTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon NIFTY has no effect on the direction of Nasdaq i.e., Nasdaq and Fubon NIFTY go up and down completely randomly.

Pair Corralation between Nasdaq and Fubon NIFTY

Given the investment horizon of 90 days Nasdaq is expected to generate 3.39 times less return on investment than Fubon NIFTY. But when comparing it to its historical volatility, Nasdaq Inc is 1.27 times less risky than Fubon NIFTY. It trades about 0.07 of its potential returns per unit of risk. Fubon NIFTY is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,736  in Fubon NIFTY on September 17, 2024 and sell it today you would earn a total of  161.00  from holding Fubon NIFTY or generate 4.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Nasdaq Inc  vs.  Fubon NIFTY

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) 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.

Fubon NIFTY

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nasdaq and Fubon NIFTY

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

The idea behind Nasdaq Inc and Fubon NIFTY 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.