Correlation Between Nasdaq and Multi Asset

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

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

Diversification Opportunities for Nasdaq and Multi Asset

0.94

Correlation Coefficient

Nasdaq  Multi Asset

Almost no diversification

The 3 months correlation between Nasdaq and Multi is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Multi Asset Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Asset Real 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 Multi Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Asset Real has no effect on the direction of Nasdaq i.e., Nasdaq and Multi Asset go up and down completely randomly.

Pair Corralation between Nasdaq and Multi Asset

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.78 times more return on investment than Multi Asset. However, Nasdaq Inc is 1.28 times less risky than Multi Asset. It trades about -0.18 of its potential returns per unit of risk. Multi Asset Real Return is currently generating about -0.16 per unit of risk. If you would invest  8,083  in Nasdaq Inc on September 23, 2024 and sell it today you would lose (313.00) from holding Nasdaq Inc or give up 3.87% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Multi Asset Real Return

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.

Multi Asset Real

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Asset Real Return are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Multi Asset

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

The idea behind Nasdaq Inc and Multi Asset Real Return 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.