Correlation Between Small Cap and Nationwide Fund6

Can any of the company-specific risk be diversified away by investing in both Small Cap and Nationwide Fund6 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 Small Cap and Nationwide Fund6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Stock and Nationwide Fund6, you can compare the effects of market volatilities on Small Cap and Nationwide Fund6 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 Small Cap with a short position of Nationwide Fund6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Nationwide Fund6.

Diversification Opportunities for Small Cap and Nationwide Fund6

0.87

Correlation Coefficient

Small Cap  Nationwide Fund6

Very poor diversification

The 3 months correlation between Small and Nationwide is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Nationwide Fund6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Fund6 and Small Cap 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 Small Cap Stock are associated (or correlated) with Nationwide Fund6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Fund6 has no effect on the direction of Small Cap i.e., Small Cap and Nationwide Fund6 go up and down completely randomly.

Pair Corralation between Small Cap and Nationwide Fund6

Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Nationwide Fund6. In addition to that, Small Cap is 1.05 times more volatile than Nationwide Fund6. It trades about -0.13 of its total potential returns per unit of risk. Nationwide Fund6 is currently generating about -0.08 per unit of volatility. If you would invest  3,121  in Nationwide Fund6 on December 22, 2024 and sell it today you would lose (161.00) from holding Nationwide Fund6 or give up 5.16% of portfolio value over 90 days.

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

Small Cap Stock  vs.  Nationwide Fund6

Small Cap Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Stock 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 Fund6

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nationwide Fund6 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Nationwide Fund6 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Nationwide Fund6

The main advantage of trading using opposite Small Cap and Nationwide Fund6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Nationwide Fund6 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 Fund6 will offset losses from the drop in Nationwide Fund6's long position.

The idea behind Small Cap Stock and Nationwide Fund6 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.