Correlation Between Federated Mid and Nationwide Mid

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

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

Diversification Opportunities for Federated Mid and Nationwide Mid

0.62

Correlation Coefficient

Federated Mid  Nationwide Mid

Poor diversification

The 3 months correlation between Federated and Nationwide is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Federated Mid Cap Index and Nationwide Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Mid Cap and Federated Mid 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 Federated Mid Cap Index are associated (or correlated) with Nationwide Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Mid Cap has no effect on the direction of Federated Mid i.e., Federated Mid and Nationwide Mid go up and down completely randomly.

Pair Corralation between Federated Mid and Nationwide Mid

Assuming the 90 days horizon Federated Mid Cap Index is expected to under-perform the Nationwide Mid. In addition to that, Federated Mid is 2.57 times more volatile than Nationwide Mid Cap. It trades about -0.25 of its total potential returns per unit of risk. Nationwide Mid Cap is currently generating about -0.12 per unit of volatility. If you would invest  1,873  in Nationwide Mid Cap on September 20, 2024 and sell it today you would lose (58.00) from holding Nationwide Mid Cap or give up 3.1% of portfolio value over 90 days.

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

Federated Mid Cap Index  vs.  Nationwide Mid Cap

Federated Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Mid Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Nationwide Mid Cap

Risk-Adjusted Performance

1 of 100

Modest

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

Pair Trading with Federated Mid and Nationwide Mid

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

The idea behind Federated Mid Cap Index and Nationwide Mid 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.