Correlation Between Cboe Global and Nasdaq

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

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

Diversification Opportunities for Cboe Global and Nasdaq

-0.57

Correlation Coefficient

Cboe Global  Nasdaq

Excellent diversification

The 3 months correlation between Cboe and Nasdaq is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Global Markets and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Cboe Global 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 Cboe Global Markets are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Cboe Global i.e., Cboe Global and Nasdaq go up and down completely randomly.

Pair Corralation between Cboe Global and Nasdaq

Given the investment horizon of 90 days Cboe Global Markets is expected to generate 0.83 times more return on investment than Nasdaq. However, Cboe Global Markets is 1.21 times less risky than Nasdaq. It trades about 0.08 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.04 per unit of risk. If you would invest  10,608  in Cboe Global Markets on February 3, 2024 and sell it today you would earn a total of  6,804  from holding Cboe Global Markets or generate 64.14% return on investment over 90 days.

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

Cboe Global Markets  vs.  Nasdaq Inc

Cboe Global Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cboe Global Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cboe Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nasdaq Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Cboe Global and Nasdaq

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

The idea behind Cboe Global Markets and Nasdaq Inc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.