Correlation Between Nationwide Government and Federated Kaufmann

Can any of the company-specific risk be diversified away by investing in both Nationwide Government and Federated Kaufmann 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 Federated Kaufmann 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 Federated Kaufmann Large, you can compare the effects of market volatilities on Nationwide Government and Federated Kaufmann 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 Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nationwide Government and Federated Kaufmann.

Diversification Opportunities for Nationwide Government and Federated Kaufmann

-0.6

Correlation Coefficient

Nationwide Government  Federated Kaufmann

Excellent diversification

The 3 months correlation between Nationwide and Federated is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Government Bond and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large 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 Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Nationwide Government i.e., Nationwide Government and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Nationwide Government and Federated Kaufmann

Assuming the 90 days horizon Nationwide Government Bond is expected to generate 0.03 times more return on investment than Federated Kaufmann. However, Nationwide Government Bond is 37.78 times less risky than Federated Kaufmann. It trades about 0.47 of its potential returns per unit of risk. Federated Kaufmann Large is currently generating about -0.11 per unit of risk. If you would invest  1,042  in Nationwide Government Bond on December 24, 2024 and sell it today you would earn a total of  11.00  from holding Nationwide Government Bond or generate 1.06% return on investment over 90 days.

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

Nationwide Government Bond  vs.  Federated Kaufmann Large

Nationwide Government

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Government Bond are ranked lower than 36 (%) of all funds and portfolios of funds over the last 90 days. 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.

Federated Kaufmann Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Kaufmann Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Nationwide Government and Federated Kaufmann

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

The idea behind Nationwide Government Bond and Federated Kaufmann Large 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.