Correlation Between Nasdaq and Globe Life

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

By analyzing existing cross correlation between Nasdaq Inc and Globe Life 425, you can compare the effects of market volatilities on Nasdaq and Globe Life 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 Globe Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Globe Life.

Diversification Opportunities for Nasdaq and Globe Life

-0.8

Correlation Coefficient

Nasdaq  Globe Life

Pay attention - limited upside

The 3 months correlation between Nasdaq and Globe is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Globe Life 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Life 425 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 Globe Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Life 425 has no effect on the direction of Nasdaq i.e., Nasdaq and Globe Life go up and down completely randomly.

Pair Corralation between Nasdaq and Globe Life

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Globe Life. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.19 times less risky than Globe Life. The stock trades about -0.14 of its potential returns per unit of risk. The Globe Life 425 is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,663  in Globe Life 425 on September 20, 2024 and sell it today you would lose (33.00) from holding Globe Life 425 or give up 1.98% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Globe Life 425

Nasdaq Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 5 (%) 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.

Globe Life 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Life 425 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Preferred Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nasdaq and Globe Life

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

The idea behind Nasdaq Inc and Globe Life 425 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.