Nasdaq Debuts Correlation-Focused Indexes
November 23, 2010
Nasdaq OMX Group, one of the most widely watched index providers globally, launched five indexes that track correlation between individual stocks and ETFs in a way it says can help investors capture returns even when the market is down.
The Nasdaq OMX Alpha Indexes measure the relative performance of a single stock or ETF against another single stock or leading ETF, which serves as benchmark, allowing investors to adjust their portfolios to reflect that focused performance.
The company explained the strategy by saying that “if the price of a stock declines less than a specific ETF, the Nasdaq OMX Alpha Index tracking the specific relationship between the two will increase.”
“With Nasdaq OMX Alpha Indexes, you’re trading correlation—moreover, correlation between some important asset classes like bonds versus stocks, gold versus stocks or emerging market equities versus U.S. equities,” the company said in a press release. “The recent financial crisis tells us how important that can be.”
The five new indexes focus on various correlations:
The indexes began real-time calculation on Oct. 11.
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