Correlation Between Nasdaq and Vanguard European

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

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

Diversification Opportunities for Nasdaq and Vanguard European

-0.78

Correlation Coefficient

Nasdaq  Vanguard European

Pay attention - limited upside

The 3 months correlation between Nasdaq and Vanguard is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Vanguard European Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard European Stock 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 Vanguard European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard European Stock has no effect on the direction of Nasdaq i.e., Nasdaq and Vanguard European go up and down completely randomly.

Pair Corralation between Nasdaq and Vanguard European

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.37 times more return on investment than Vanguard European. However, Nasdaq is 1.37 times more volatile than Vanguard European Stock. It trades about 0.12 of its potential returns per unit of risk. Vanguard European Stock is currently generating about -0.2 per unit of risk. If you would invest  7,283  in Nasdaq Inc on October 1, 2024 and sell it today you would earn a total of  559.00  from holding Nasdaq Inc or generate 7.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Nasdaq Inc  vs.  Vanguard European Stock

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard European Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard European Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Nasdaq and Vanguard European

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

The idea behind Nasdaq Inc and Vanguard European Stock 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.