Correlation Between Nationwide Destination and Nationwide Mellon

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

By analyzing existing cross correlation between Nationwide Destination 2055 and Nationwide Mellon Disciplined, you can compare the effects of market volatilities on Nationwide Destination and Nationwide Mellon 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 Destination with a short position of Nationwide Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nationwide Destination and Nationwide Mellon.

Diversification Opportunities for Nationwide Destination and Nationwide Mellon

0.92

Correlation Coefficient

Nationwide Destination  Nationwide Mellon

Almost no diversification

The 3 months correlation between Nationwide and Nationwide is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Destination 2055 and Nationwide Mellon Disciplined in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Mellon and Nationwide Destination 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 Destination 2055 are associated (or correlated) with Nationwide Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Mellon has no effect on the direction of Nationwide Destination i.e., Nationwide Destination and Nationwide Mellon go up and down completely randomly.

Pair Corralation between Nationwide Destination and Nationwide Mellon

Assuming the 90 days horizon Nationwide Destination is expected to generate 1.42 times less return on investment than Nationwide Mellon. But when comparing it to its historical volatility, Nationwide Destination 2055 is 1.11 times less risky than Nationwide Mellon. It trades about 0.15 of its potential returns per unit of risk. Nationwide Mellon Disciplined is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,801  in Nationwide Mellon Disciplined on September 3, 2024 and sell it today you would earn a total of  334.00  from holding Nationwide Mellon Disciplined or generate 8.79% return on investment over 90 days.

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

Nationwide Destination 2055  vs.  Nationwide Mellon Disciplined

Nationwide Destination

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Destination 2055 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nationwide Destination is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nationwide Mellon

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Mellon Disciplined are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Nationwide Mellon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nationwide Destination and Nationwide Mellon

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

The idea behind Nationwide Destination 2055 and Nationwide Mellon Disciplined 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.