Correlation Between Nasdaq and Global X

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

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

Diversification Opportunities for Nasdaq and Global X

0.94

Correlation Coefficient

Nasdaq  Global X

Almost no diversification

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

Pair Corralation between Nasdaq and Global X

Given the investment horizon of 90 days Nasdaq is expected to generate 1.2 times less return on investment than Global X. In addition to that, Nasdaq is 1.71 times more volatile than Global X SPTSX. It trades about 0.05 of its total potential returns per unit of risk. Global X SPTSX is currently generating about 0.11 per unit of volatility. If you would invest  5,725  in Global X SPTSX on September 12, 2024 and sell it today you would earn a total of  2,872  from holding Global X SPTSX or generate 50.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Nasdaq Inc  vs.  Global X SPTSX

Nasdaq Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X SPTSX

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SPTSX are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Global X

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

The idea behind Nasdaq Inc and Global X SPTSX 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.