Correlation Between Invesco Technology and Nationwide Fund

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

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

Diversification Opportunities for Invesco Technology and Nationwide Fund

0.96

Correlation Coefficient

Invesco Technology  Nationwide Fund

Almost no diversification

The 3 months correlation between Invesco and Nationwide is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology Fund and Nationwide Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Fund Inst and Invesco Technology 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 Invesco Technology Fund are associated (or correlated) with Nationwide Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Fund Inst has no effect on the direction of Invesco Technology i.e., Invesco Technology and Nationwide Fund go up and down completely randomly.

Pair Corralation between Invesco Technology and Nationwide Fund

Assuming the 90 days horizon Invesco Technology Fund is expected to under-perform the Nationwide Fund. In addition to that, Invesco Technology is 1.93 times more volatile than Nationwide Fund Institutional. It trades about -0.11 of its total potential returns per unit of risk. Nationwide Fund Institutional is currently generating about -0.06 per unit of volatility. If you would invest  3,090  in Nationwide Fund Institutional on December 28, 2024 and sell it today you would lose (124.00) from holding Nationwide Fund Institutional or give up 4.01% of portfolio value over 90 days.

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

Invesco Technology Fund  vs.  Nationwide Fund Institutional

Invesco Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Technology Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Nationwide Fund Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nationwide Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Nationwide 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 Invesco Technology and Nationwide Fund

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

The idea behind Invesco Technology Fund and Nationwide Fund Institutional 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.