Correlation Between Nationwide Government and Jacob Small

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

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

Diversification Opportunities for Nationwide Government and Jacob Small

0.43

Correlation Coefficient

Nationwide Government  Jacob Small

Very weak diversification

The 3 months correlation between Nationwide and Jacob is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Government Bond and Jacob Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacob Small Cap and Nationwide Government 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 Government Bond are associated (or correlated) with Jacob Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacob Small Cap has no effect on the direction of Nationwide Government i.e., Nationwide Government and Jacob Small go up and down completely randomly.

Pair Corralation between Nationwide Government and Jacob Small

Assuming the 90 days horizon Nationwide Government Bond is expected to generate 0.13 times more return on investment than Jacob Small. However, Nationwide Government Bond is 7.81 times less risky than Jacob Small. It trades about -0.19 of its potential returns per unit of risk. Jacob Small Cap is currently generating about -0.15 per unit of risk. If you would invest  1,054  in Nationwide Government Bond on October 9, 2024 and sell it today you would lose (10.00) from holding Nationwide Government Bond or give up 0.95% of portfolio value over 90 days.

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

Nationwide Government Bond  vs.  Jacob Small Cap

Nationwide Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jacob Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacob Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Jacob Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nationwide Government and Jacob Small

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

The idea behind Nationwide Government Bond and Jacob Small 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.