Correlation Between Fabxx and Nationwide

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

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

Diversification Opportunities for Fabxx and Nationwide

0.28

Correlation Coefficient

Fabxx  Nationwide

Modest diversification

The 3 months correlation between Fabxx and Nationwide is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Fabxx and Nationwide E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide E Plus and Fabxx 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 Fabxx are associated (or correlated) with Nationwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide E Plus has no effect on the direction of Fabxx i.e., Fabxx and Nationwide go up and down completely randomly.

Pair Corralation between Fabxx and Nationwide

Assuming the 90 days horizon Fabxx is expected to under-perform the Nationwide. In addition to that, Fabxx is 13.65 times more volatile than Nationwide E Plus. It trades about -0.01 of its total potential returns per unit of risk. Nationwide E Plus is currently generating about -0.1 per unit of volatility. If you would invest  918.00  in Nationwide E Plus on September 4, 2024 and sell it today you would lose (18.00) from holding Nationwide E Plus or give up 1.96% of portfolio value over 90 days.

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

Fabxx  vs.  Nationwide E Plus

Fabxx

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nationwide E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide E Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Nationwide is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fabxx and Nationwide

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

The idea behind Fabxx and Nationwide E Plus 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.