Correlation Between Nasdaq and Valley National

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

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

Diversification Opportunities for Nasdaq and Valley National

0.94

Correlation Coefficient

Nasdaq  Valley National

Almost no diversification

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

Pair Corralation between Nasdaq and Valley National

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.95 times more return on investment than Valley National. However, Nasdaq Inc is 1.05 times less risky than Valley National. It trades about 0.15 of its potential returns per unit of risk. Valley National Bancorp is currently generating about 0.11 per unit of risk. If you would invest  7,890  in Nasdaq Inc on September 13, 2024 and sell it today you would earn a total of  241.00  from holding Nasdaq Inc or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Nasdaq Inc  vs.  Valley National Bancorp

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 unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Valley National Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valley National Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Valley National showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Valley National

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

The idea behind Nasdaq Inc and Valley National Bancorp 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.