Correlation Between Nationwide Mellon and Schwab Small

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

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

Diversification Opportunities for Nationwide Mellon and Schwab Small

0.62

Correlation Coefficient

Nationwide Mellon  Schwab Small

Poor diversification

The 3 months correlation between Nationwide and Schwab is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Mellon Disciplined and Schwab Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Small Cap and Nationwide Mellon 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 Mellon Disciplined are associated (or correlated) with Schwab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Small Cap has no effect on the direction of Nationwide Mellon i.e., Nationwide Mellon and Schwab Small go up and down completely randomly.

Pair Corralation between Nationwide Mellon and Schwab Small

Assuming the 90 days horizon Nationwide Mellon is expected to generate 2.95 times less return on investment than Schwab Small. But when comparing it to its historical volatility, Nationwide Mellon Disciplined is 1.19 times less risky than Schwab Small. It trades about 0.02 of its potential returns per unit of risk. Schwab Small Cap Index is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,177  in Schwab Small Cap Index on October 24, 2024 and sell it today you would earn a total of  536.00  from holding Schwab Small Cap Index or generate 16.87% return on investment over 90 days.

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

Nationwide Mellon Disciplined  vs.  Schwab Small Cap Index

Nationwide Mellon

Risk-Adjusted Performance

0 of 100

Very Weak

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

Schwab Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Small Cap Index are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Small 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 Mellon and Schwab Small

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

The idea behind Nationwide Mellon Disciplined and Schwab Small Cap Index 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.