Correlation Between New Perspective and Nationwide Growth

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

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

Diversification Opportunities for New Perspective and Nationwide Growth

0.79

Correlation Coefficient

New Perspective  Nationwide Growth

Poor diversification

The 3 months correlation between NEW and NATIONWIDE is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Nationwide Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Growth and New Perspective 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 New Perspective Fund are associated (or correlated) with Nationwide Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Growth has no effect on the direction of New Perspective i.e., New Perspective and Nationwide Growth go up and down completely randomly.

Pair Corralation between New Perspective and Nationwide Growth

Assuming the 90 days horizon New Perspective is expected to generate 1.65 times less return on investment than Nationwide Growth. But when comparing it to its historical volatility, New Perspective Fund is 1.15 times less risky than Nationwide Growth. It trades about 0.27 of its potential returns per unit of risk. Nationwide Growth Fund is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,647  in Nationwide Growth Fund on September 5, 2024 and sell it today you would earn a total of  98.00  from holding Nationwide Growth Fund or generate 5.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

New Perspective Fund  vs.  Nationwide Growth Fund

New Perspective

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Perspective Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, New Perspective may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nationwide Growth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Growth Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nationwide Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with New Perspective and Nationwide Growth

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

The idea behind New Perspective Fund and Nationwide Growth Fund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.