Correlation Between Nationwide International and Nationwide Small

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

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

Diversification Opportunities for Nationwide International and Nationwide Small

-0.6

Correlation Coefficient

Nationwide International  Nationwide Small

Excellent diversification

The 3 months correlation between Nationwide and Nationwide is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide International Index and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap and Nationwide International 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 Nationwide International Index are associated (or correlated) with Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Nationwide International i.e., Nationwide International and Nationwide Small go up and down completely randomly.

Pair Corralation between Nationwide International and Nationwide Small

Assuming the 90 days horizon Nationwide International Index is expected to generate 0.65 times more return on investment than Nationwide Small. However, Nationwide International Index is 1.55 times less risky than Nationwide Small. It trades about 0.08 of its potential returns per unit of risk. Nationwide Small Cap is currently generating about -0.05 per unit of risk. If you would invest  899.00  in Nationwide International Index on September 10, 2024 and sell it today you would earn a total of  9.00  from holding Nationwide International Index or generate 1.0% return on investment over 90 days.

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

Nationwide International Index  vs.  Nationwide Small Cap

Nationwide International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nationwide Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nationwide Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nationwide International and Nationwide Small

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

The idea behind Nationwide International Index and Nationwide Small Cap 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.