Correlation Between Nationwide Bond and Madison Diversified

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

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

Diversification Opportunities for Nationwide Bond and Madison Diversified

0.74

Correlation Coefficient

Nationwide Bond  Madison Diversified

Poor diversification

The 3 months correlation between Nationwide and Madison is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Bond Fund and Madison Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Diversified and Nationwide Bond 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 Bond Fund are associated (or correlated) with Madison Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Diversified has no effect on the direction of Nationwide Bond i.e., Nationwide Bond and Madison Diversified go up and down completely randomly.

Pair Corralation between Nationwide Bond and Madison Diversified

Assuming the 90 days horizon Nationwide Bond Fund is expected to generate 0.74 times more return on investment than Madison Diversified. However, Nationwide Bond Fund is 1.35 times less risky than Madison Diversified. It trades about 0.11 of its potential returns per unit of risk. Madison Diversified Income is currently generating about 0.05 per unit of risk. If you would invest  801.00  in Nationwide Bond Fund on December 23, 2024 and sell it today you would earn a total of  12.00  from holding Nationwide Bond Fund or generate 1.5% return on investment over 90 days.

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

Nationwide Bond Fund  vs.  Madison Diversified Income

Nationwide Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Bond Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nationwide Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Madison Diversified

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Diversified Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Madison Diversified 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 Bond and Madison Diversified

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

The idea behind Nationwide Bond Fund and Madison Diversified Income 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.