Correlation Between Nationwide International and Balanced Fund

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

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

Diversification Opportunities for Nationwide International and Balanced Fund

-0.22

Correlation Coefficient

Nationwide International  Balanced Fund

Very good diversification

The 3 months correlation between Nationwide and Balanced is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide International Index and Balanced Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Investor and Nationwide International 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 Nationwide International Index are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Investor has no effect on the direction of Nationwide International i.e., Nationwide International and Balanced Fund go up and down completely randomly.

Pair Corralation between Nationwide International and Balanced Fund

Assuming the 90 days horizon Nationwide International Index is expected to under-perform the Balanced Fund. In addition to that, Nationwide International is 1.81 times more volatile than Balanced Fund Investor. It trades about -0.07 of its total potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.08 per unit of volatility. If you would invest  1,984  in Balanced Fund Investor on September 16, 2024 and sell it today you would earn a total of  42.00  from holding Balanced Fund Investor or generate 2.12% return on investment over 90 days.

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

Nationwide International Index  vs.  Balanced Fund Investor

Nationwide International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Balanced Fund Investor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nationwide International and Balanced Fund

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

The idea behind Nationwide International Index and Balanced Fund Investor 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.