Correlation Between Nationwide Government and Global Core

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

Diversification Opportunities for Nationwide Government and Global Core

0.57

Correlation Coefficient

Nationwide Government  Global Core

Very weak diversification

The 3 months correlation between Nationwide and Global is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Government Bond and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio 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 Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Nationwide Government i.e., Nationwide Government and Global Core go up and down completely randomly.

Pair Corralation between Nationwide Government and Global Core

Assuming the 90 days horizon Nationwide Government Bond is expected to generate 0.31 times more return on investment than Global Core. However, Nationwide Government Bond is 3.27 times less risky than Global Core. It trades about -0.18 of its potential returns per unit of risk. Global E Portfolio is currently generating about -0.16 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.  Global E Portfolio

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.

Global E Portfolio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Portfolio are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Core 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 Government and Global Core

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

The idea behind Nationwide Government Bond and Global E Portfolio 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.