Correlation Between Nasdaq and Intermediate Bond

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

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

Diversification Opportunities for Nasdaq and Intermediate Bond

-0.6

Correlation Coefficient

Nasdaq  Intermediate Bond

Excellent diversification

The 3 months correlation between Nasdaq and Intermediate is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Intermediate Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Bond 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 Intermediate Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Bond has no effect on the direction of Nasdaq i.e., Nasdaq and Intermediate Bond go up and down completely randomly.

Pair Corralation between Nasdaq and Intermediate Bond

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Intermediate Bond. In addition to that, Nasdaq is 5.92 times more volatile than Intermediate Bond Fund. It trades about -0.19 of its total potential returns per unit of risk. Intermediate Bond Fund is currently generating about -0.2 per unit of volatility. If you would invest  1,247  in Intermediate Bond Fund on September 24, 2024 and sell it today you would lose (9.00) from holding Intermediate Bond Fund or give up 0.72% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Intermediate Bond Fund

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) 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.

Intermediate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Intermediate Bond 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 Intermediate Bond

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

The idea behind Nasdaq Inc and Intermediate Bond Fund 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.