Correlation Between Commonwealth Real and Nicholas Fund

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Can any of the company-specific risk be diversified away by investing in both Commonwealth Real and Nicholas Fund 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 Commonwealth Real and Nicholas Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Real Estate and Nicholas Fund Inc, you can compare the effects of market volatilities on Commonwealth Real and Nicholas Fund 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 Commonwealth Real with a short position of Nicholas Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Real and Nicholas Fund.

Diversification Opportunities for Commonwealth Real and Nicholas Fund

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Commonwealth and Nicholas is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Real Estate and Nicholas Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Fund and Commonwealth Real 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 Commonwealth Real Estate are associated (or correlated) with Nicholas Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Fund has no effect on the direction of Commonwealth Real i.e., Commonwealth Real and Nicholas Fund go up and down completely randomly.

Pair Corralation between Commonwealth Real and Nicholas Fund

Assuming the 90 days horizon Commonwealth Real Estate is expected to under-perform the Nicholas Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Commonwealth Real Estate is 1.04 times less risky than Nicholas Fund. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Nicholas Fund Inc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,702  in Nicholas Fund Inc on October 20, 2024 and sell it today you would lose (208.00) from holding Nicholas Fund Inc or give up 2.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Commonwealth Real Estate  vs.  Nicholas Fund Inc

 Performance 
       Timeline  
Commonwealth Real Estate 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Commonwealth Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Commonwealth Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Nicholas Fund 

Risk-Adjusted Performance

0 of 100

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

Commonwealth Real and Nicholas Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Commonwealth Real and Nicholas Fund

The main advantage of trading using opposite Commonwealth Real and Nicholas Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Real position performs unexpectedly, Nicholas Fund 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 Nicholas Fund will offset losses from the drop in Nicholas Fund's long position.
The idea behind Commonwealth Real Estate and Nicholas Fund Inc 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.
Check out your portfolio center.
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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