Correlation Between Simt Large and Nationwide Government

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

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

Diversification Opportunities for Simt Large and Nationwide Government

0.54

Correlation Coefficient

Simt Large  Nationwide Government

Very weak diversification

The 3 months correlation between Simt and Nationwide is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Simt Large Cap and Nationwide Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Government and Simt Large 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 Simt Large Cap 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 Simt Large i.e., Simt Large and Nationwide Government go up and down completely randomly.

Pair Corralation between Simt Large and Nationwide Government

Assuming the 90 days horizon Simt Large Cap is expected to under-perform the Nationwide Government. In addition to that, Simt Large is 35.27 times more volatile than Nationwide Government Bond. It trades about -0.29 of its total potential returns per unit of risk. Nationwide Government Bond is currently generating about 0.3 per unit of volatility. If you would invest  1,041  in Nationwide Government Bond on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Nationwide Government Bond or generate 0.29% return on investment over 90 days.

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

Simt Large Cap  vs.  Nationwide Government Bond

Simt Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simt Large Cap 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.

Nationwide Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Government Bond has generated negative risk-adjusted returns adding no value to fund investors. 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 Simt Large and Nationwide Government

The main advantage of trading using opposite Simt Large and Nationwide Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simt Large 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 Simt Large Cap 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 Transaction History module to view history of all your transactions and understand their impact on performance.