Correlation Between Ab Bond and Nationwide Bond

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

By analyzing existing cross correlation between Ab Bond Inflation and Nationwide Bond Fund, you can compare the effects of market volatilities on Ab Bond and Nationwide Bond 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 Ab Bond with a short position of Nationwide Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and Nationwide Bond.

Diversification Opportunities for Ab Bond and Nationwide Bond

0.88

Correlation Coefficient

Ab Bond  Nationwide Bond

Very poor diversification

The 3 months correlation between ANBIX and Nationwide is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Nationwide Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Bond and Ab Bond 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 Ab Bond Inflation are associated (or correlated) with Nationwide Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Bond has no effect on the direction of Ab Bond i.e., Ab Bond and Nationwide Bond go up and down completely randomly.

Pair Corralation between Ab Bond and Nationwide Bond

Assuming the 90 days horizon Ab Bond is expected to generate 1.14 times less return on investment than Nationwide Bond. But when comparing it to its historical volatility, Ab Bond Inflation is 1.6 times less risky than Nationwide Bond. It trades about 0.1 of its potential returns per unit of risk. Nationwide Bond Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  755.00  in Nationwide Bond Fund on September 12, 2024 and sell it today you would earn a total of  71.00  from holding Nationwide Bond Fund or generate 9.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Ab Bond Inflation  vs.  Nationwide Bond Fund

Ab Bond Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Bond Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ab Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nationwide Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Nationwide Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Bond and Nationwide Bond

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

The idea behind Ab Bond Inflation and Nationwide Bond Fund 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.