Correlation Between Nasdaq and Western Asset

Can any of the company-specific risk be diversified away by investing in both Nasdaq and Western 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 Western 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 Western Asset Short, you can compare the effects of market volatilities on Nasdaq and Western 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Western Asset.

Diversification Opportunities for Nasdaq and Western Asset

0.0

Correlation Coefficient

Nasdaq  Western Asset

Pay attention - limited upside

The 3 months correlation between Nasdaq and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Western Asset Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Short 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Short has no effect on the direction of Nasdaq i.e., Nasdaq and Western Asset go up and down completely randomly.

Pair Corralation between Nasdaq and Western Asset

If you would invest (100.00) in Western Asset Short on September 23, 2024 and sell it today you would earn a total of  100.00  from holding Western Asset Short or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Nasdaq Inc  vs.  Western Asset Short

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.

Western Asset Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Western 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 Western Asset

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

The idea behind Nasdaq Inc and Western Asset Short 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.