Correlation Between Smallcap Growth and Nationwide Inflation

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

By analyzing existing cross correlation between Smallcap Growth Fund and Nationwide Inflation Protected Securities, you can compare the effects of market volatilities on Smallcap Growth and Nationwide Inflation 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 Smallcap Growth with a short position of Nationwide Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Nationwide Inflation.

Diversification Opportunities for Smallcap Growth and Nationwide Inflation

0.42

Correlation Coefficient

Smallcap Growth  Nationwide Inflation

Very weak diversification

The 3 months correlation between Smallcap and Nationwide is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Nationwide Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Inflation and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Nationwide Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Inflation has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Nationwide Inflation go up and down completely randomly.

Pair Corralation between Smallcap Growth and Nationwide Inflation

Assuming the 90 days horizon Smallcap Growth Fund is expected to under-perform the Nationwide Inflation. In addition to that, Smallcap Growth is 7.37 times more volatile than Nationwide Inflation Protected Securities. It trades about -0.3 of its total potential returns per unit of risk. Nationwide Inflation Protected Securities is currently generating about -0.41 per unit of volatility. If you would invest  904.00  in Nationwide Inflation Protected Securities on October 8, 2024 and sell it today you would lose (19.00) from holding Nationwide Inflation Protected Securities or give up 2.1% of portfolio value over 90 days.

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

Smallcap Growth Fund  vs.  Nationwide Inflation Protected

Smallcap Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nationwide Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Smallcap Growth and Nationwide Inflation

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

The idea behind Smallcap Growth Fund and Nationwide Inflation Protected Securities 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.