Page 341 - IMDR JOURNAL 2023-24

IMDR’s Journal of Management Development & Research 2023-24

performance, even when influenced by broader global factors. For instance, domestic policies

and regulations specific to each country can significantly impact their respective stock market
performances.

4. Geopolitical Events:

Geopolitical events can have varying impacts on each market based on their exposure and
sensitivity to specific regions and political developments. For example, a trade war between

the US and China might affect US companies listed on the Nasdaq more than Indian

companies on the Nifty due to their differing levels of economic entanglement with China.

Implications:

1. Investment Strategies:

 Limited Hedging and Diversification: Due to the weak correlation, investors cannot
solely rely on simultaneous investments in both indices for effective risk hedging or

portfolio diversification.

 SD and Variance Analysis: Analysing an index's standard deviation (SD) and variance
can provide valuable insights. For instance, exceeding the SD might indicate a potential

market correction, allowing investors to develop informed strategies based on the index's
historical range.

 Exploring Alternative Strategies: Investors should explore alternative diversification

strategies beyond simply balancing between the Nifty and Nasdaq. This might involve
incorporating assets from other regions or asset classes with lower correlation to the target

indices.

2. Policy Considerations:
 Independent Policymaking: Policymakers need to acknowledge that events affecting one

index might not have a proportional impact on the other. Economic policies formulated

based solely on the performance of one index may not translate effectively to the other,
necessitating a more nuanced approach.

Conclusion:

In conclusion, the study provides valuable insights into the long-term correlation between the

Nasdaq and Nifty indices within the Indian context. Through a punctilious analysis of
historical price data and statistical techniques.

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