Correlation Between Nationwide Highmark and Destinations Small

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

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

Diversification Opportunities for Nationwide Highmark and Destinations Small

0.89

Correlation Coefficient

Nationwide Highmark  Destinations Small

Very poor diversification

The 3 months correlation between Nationwide and Destinations is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Highmark Small and Destinations Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Small Mid and Nationwide Highmark 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 Highmark Small are associated (or correlated) with Destinations Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Small Mid has no effect on the direction of Nationwide Highmark i.e., Nationwide Highmark and Destinations Small go up and down completely randomly.

Pair Corralation between Nationwide Highmark and Destinations Small

Assuming the 90 days horizon Nationwide Highmark is expected to generate 2.47 times less return on investment than Destinations Small. But when comparing it to its historical volatility, Nationwide Highmark Small is 1.04 times less risky than Destinations Small. It trades about 0.02 of its potential returns per unit of risk. Destinations Small Mid Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,193  in Destinations Small Mid Cap on October 5, 2024 and sell it today you would earn a total of  154.00  from holding Destinations Small Mid Cap or generate 12.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.63%
Values	Daily Returns

Nationwide Highmark Small  vs.  Destinations Small Mid Cap

Nationwide Highmark Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Highmark Small 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.

Destinations Small Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations Small Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Destinations 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 Highmark and Destinations Small

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

The idea behind Nationwide Highmark Small and Destinations Small Mid 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.