Correlation Between Pinnacle Value and Nationwide Government

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

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

Diversification Opportunities for Pinnacle Value and Nationwide Government

-0.55

Correlation Coefficient

Pinnacle Value  Nationwide Government

Excellent diversification

The 3 months correlation between Pinnacle and Nationwide is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Value Fund and Nationwide Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Government and Pinnacle Value 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 Pinnacle Value Fund are associated (or correlated) with Nationwide Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Government has no effect on the direction of Pinnacle Value i.e., Pinnacle Value and Nationwide Government go up and down completely randomly.

Pair Corralation between Pinnacle Value and Nationwide Government

Assuming the 90 days horizon Pinnacle Value Fund is expected to under-perform the Nationwide Government. In addition to that, Pinnacle Value is 17.42 times more volatile than Nationwide Government Bond. It trades about -0.06 of its total potential returns per unit of risk. Nationwide Government Bond is currently generating about 0.46 per unit of volatility. If you would invest  1,042  in Nationwide Government Bond on December 23, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pinnacle Value Fund  vs.  Nationwide Government Bond

Pinnacle Value

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Pinnacle Value and Nationwide Government

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

The idea behind Pinnacle Value Fund and Nationwide Government Bond 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 Global Correlations module to find global opportunities by holding instruments from different markets.