Correlation Between Nasdaq and SP Global

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

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

Diversification Opportunities for Nasdaq and SP Global

-0.22

Correlation Coefficient

Nasdaq  SP Global

Very good diversification

The 3 months correlation between Nasdaq and SPGI is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of Nasdaq i.e., Nasdaq and SP Global go up and down completely randomly.

Pair Corralation between Nasdaq and SP Global

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.02 times more return on investment than SP Global. However, Nasdaq is 1.02 times more volatile than SP Global. It trades about 0.23 of its potential returns per unit of risk. SP Global is currently generating about 0.04 per unit of risk. If you would invest  7,184  in Nasdaq Inc on August 30, 2024 and sell it today you would earn a total of  1,121  from holding Nasdaq Inc or generate 15.6% return on investment over 90 days.

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

Nasdaq Inc  vs.  SP Global

Nasdaq Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq reported solid returns over the last few months and may actually be approaching a breakup point.

SP Global

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SP Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, SP Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nasdaq and SP Global

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

The idea behind Nasdaq Inc and SP Global 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.