Correlation Between Nationwide Small and Transamerica Funds

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

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

Diversification Opportunities for Nationwide Small and Transamerica Funds

0.39

Correlation Coefficient

Nationwide Small  Transamerica Funds

Weak diversification

The 3 months correlation between Nationwide and Transamerica is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Small Cap and Transamerica Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Funds and Nationwide Small 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 Small Cap are associated (or correlated) with Transamerica Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Funds has no effect on the direction of Nationwide Small i.e., Nationwide Small and Transamerica Funds go up and down completely randomly.

Pair Corralation between Nationwide Small and Transamerica Funds

Assuming the 90 days horizon Nationwide Small Cap is expected to generate 1.63 times more return on investment than Transamerica Funds. However, Nationwide Small is 1.63 times more volatile than Transamerica Funds . It trades about 0.03 of its potential returns per unit of risk. Transamerica Funds is currently generating about 0.02 per unit of risk. If you would invest  1,034  in Nationwide Small Cap on October 22, 2024 and sell it today you would earn a total of  161.00  from holding Nationwide Small Cap or generate 15.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.52%
Values	Daily Returns

Nationwide Small Cap  vs.  Transamerica Funds

Nationwide Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transamerica Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Transamerica Funds 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 Small and Transamerica Funds

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

The idea behind Nationwide Small Cap and Transamerica Funds 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.