Correlation Between Nationwide Small and Nationwide Bond

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

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

Diversification Opportunities for Nationwide Small and Nationwide Bond

-0.65

Correlation Coefficient

Nationwide Small  Nationwide Bond

Excellent diversification

The 3 months correlation between Nationwide and Nationwide is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Small Cap and Nationwide Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Bond Index and Nationwide Small 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 Small Cap 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 Index has no effect on the direction of Nationwide Small i.e., Nationwide Small and Nationwide Bond go up and down completely randomly.

Pair Corralation between Nationwide Small and Nationwide Bond

Assuming the 90 days horizon Nationwide Small Cap is expected to generate 4.16 times more return on investment than Nationwide Bond. However, Nationwide Small is 4.16 times more volatile than Nationwide Bond Index. It trades about 0.16 of its potential returns per unit of risk. Nationwide Bond Index is currently generating about -0.07 per unit of risk. If you would invest  1,168  in Nationwide Small Cap on September 5, 2024 and sell it today you would earn a total of  158.00  from holding Nationwide Small Cap or generate 13.53% return on investment over 90 days.

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

Nationwide Small Cap  vs.  Nationwide Bond Index

Nationwide Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Small Cap are ranked lower than 12 (%) 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.

Nationwide Bond Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Bond Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, 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 Nationwide Small and Nationwide Bond

The main advantage of trading using opposite Nationwide Small and Nationwide Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nationwide Small 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 Nationwide Small Cap and Nationwide Bond Index 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.