Correlation Between Nasdaq and Yellow Pages

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Can any of the company-specific risk be diversified away by investing in both Nasdaq and Yellow Pages 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 Yellow Pages into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Yellow Pages Limited, you can compare the effects of market volatilities on Nasdaq and Yellow Pages 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 Yellow Pages. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Yellow Pages.

Diversification Opportunities for Nasdaq and Yellow Pages

NasdaqYellowDiversified AwayNasdaqYellowDiversified Away100%
0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nasdaq and Yellow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Yellow Pages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yellow Pages Limited 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 Yellow Pages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yellow Pages Limited has no effect on the direction of Nasdaq i.e., Nasdaq and Yellow Pages go up and down completely randomly.

Pair Corralation between Nasdaq and Yellow Pages

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Yellow Pages. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 2.1 times less risky than Yellow Pages. The stock trades about -0.13 of its potential returns per unit of risk. The Yellow Pages Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,146  in Yellow Pages Limited on October 11, 2024 and sell it today you would lose (2.00) from holding Yellow Pages Limited or give up 0.17% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Nasdaq Inc  vs.  Yellow Pages Limited

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0510152025
JavaScript chart by amCharts 3.21.15NDAQ Y
       Timeline  
Nasdaq Inc 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) 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 February 2025.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan72747678808284
Yellow Pages Limited 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Pages Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Yellow Pages displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan9.51010.51111.512

Nasdaq and Yellow Pages Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.36-2.51-1.67-0.830.00.91.792.693.58 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15NDAQ Y
       Returns  

Pair Trading with Nasdaq and Yellow Pages

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

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