Correlation Between California Bond and Nationwide Fund

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

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

Diversification Opportunities for California Bond and Nationwide Fund

0.74

Correlation Coefficient

California Bond  Nationwide Fund

Poor diversification

The 3 months correlation between California and Nationwide is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Nationwide Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Fund Inst and California Bond 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 California Bond Fund are associated (or correlated) with Nationwide Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Fund Inst has no effect on the direction of California Bond i.e., California Bond and Nationwide Fund go up and down completely randomly.

Pair Corralation between California Bond and Nationwide Fund

Assuming the 90 days horizon California Bond is expected to generate 4.3 times less return on investment than Nationwide Fund. But when comparing it to its historical volatility, California Bond Fund is 3.54 times less risky than Nationwide Fund. It trades about 0.04 of its potential returns per unit of risk. Nationwide Fund Institutional is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,482  in Nationwide Fund Institutional on December 4, 2024 and sell it today you would earn a total of  568.00  from holding Nationwide Fund Institutional or generate 22.88% return on investment over 90 days.

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

California Bond Fund  vs.  Nationwide Fund Institutional

California Bond

Risk-Adjusted Performance

Very Weak

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

Nationwide Fund Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nationwide Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with California Bond and Nationwide Fund

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

The idea behind California Bond Fund and Nationwide Fund Institutional 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.