Correlation Between Ab Large and Nationwide All

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

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

Diversification Opportunities for Ab Large and Nationwide All

0.7

Correlation Coefficient

Ab Large  Nationwide All

Poor diversification

The 3 months correlation between ALCKX and Nationwide is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ab Large Cap and Nationwide All Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide All Cap and Ab Large 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 Large Cap are associated (or correlated) with Nationwide All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide All Cap has no effect on the direction of Ab Large i.e., Ab Large and Nationwide All go up and down completely randomly.

Pair Corralation between Ab Large and Nationwide All

Assuming the 90 days horizon Ab Large is expected to generate 2.19 times less return on investment than Nationwide All. But when comparing it to its historical volatility, Ab Large Cap is 1.16 times less risky than Nationwide All. It trades about 0.02 of its potential returns per unit of risk. Nationwide All Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,975  in Nationwide All Cap on October 26, 2024 and sell it today you would earn a total of  43.00  from holding Nationwide All Cap or generate 2.18% return on investment over 90 days.

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

Ab Large Cap  vs.  Nationwide All Cap

Ab Large Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Large Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Ab Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nationwide All Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide All Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nationwide All 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 Large and Nationwide All

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

The idea behind Ab Large Cap and Nationwide All 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.