Correlation Between The Brown and Nationwide Small

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

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

Diversification Opportunities for The Brown and Nationwide Small

0.95

Correlation Coefficient

The Brown  Nationwide Small

Almost no diversification

The 3 months correlation between The and Nationwide is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding The Brown Capital and Nationwide Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Pany and The Brown 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 The Brown Capital 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 Pany has no effect on the direction of The Brown i.e., The Brown and Nationwide Small go up and down completely randomly.

Pair Corralation between The Brown and Nationwide Small

Assuming the 90 days horizon The Brown Capital is expected to under-perform the Nationwide Small. In addition to that, The Brown is 1.01 times more volatile than Nationwide Small Pany. It trades about -0.2 of its total potential returns per unit of risk. Nationwide Small Pany is currently generating about -0.2 per unit of volatility. If you would invest  1,309  in Nationwide Small Pany on December 21, 2024 and sell it today you would lose (199.00) from holding Nationwide Small Pany or give up 15.2% of portfolio value over 90 days.

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

The Brown Capital  vs.  Nationwide Small Pany

Brown Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Brown Capital has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Nationwide Small Pany

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nationwide Small Pany has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with The Brown and Nationwide Small

The main advantage of trading using opposite The Brown and Nationwide Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Brown 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 The Brown Capital and Nationwide Small Pany 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 Stocks Directory module to find actively traded stocks across global markets.