The Nasdaq OMX Group has launched five Nasdaq OMX Alpha Indexes, designed to help market participants measure performance between stock and exchange-traded funds.
The new indices, which began real-time calculation and dissemination on 11 October, will highlight a suite of new derivatives products that will allow investors and traders the opportunity to generate returns even when the market is down.
Nasdaq OMX Alpha Indexes allow market participants to track the return of a single stock or ETF against a leading ETF or another single stock of the same type, allowing investors and traders to capitalise on opportunities to generate returns.
For example, 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. This ability to track correlation gives market players the opportunity to adjust their portfolios in accordance with the particular market relationship being tracked.
"Nasdaq OMX Alpha Indexes have the potential for being as widely used as other indexes that are industry standards for market volatility and price," says Robert E. Whaley of Vanderbilt University’s Owen Graduate School of Management. "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 US equities. The recent financial crisis tells us how important that can be."
"Nasdaq OMX has a long history of new product and market innovation from the creation of the Nasdaq-100 Index to PHLX sector indexes," says Eric Noll, executive vice president of US transaction services at Nasdaq OMX. "The debut of Nasdaq OMX Alpha Indexes will allow us to list proprietary options in the near future on PHLX or the Nasdaq Options Market."