Correlation Between Vanguard California and Nationwide Destination

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

By analyzing existing cross correlation between Vanguard California Long Term and Nationwide Destination 2055, you can compare the effects of market volatilities on Vanguard California and Nationwide Destination 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 Vanguard California with a short position of Nationwide Destination. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and Nationwide Destination.

Diversification Opportunities for Vanguard California and Nationwide Destination

0.16

Correlation Coefficient

Vanguard California  Nationwide Destination

Average diversification

The 3 months correlation between VANGUARD and Nationwide is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Long Term and Nationwide Destination 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Destination and Vanguard California 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 Vanguard California Long Term are associated (or correlated) with Nationwide Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Destination has no effect on the direction of Vanguard California i.e., Vanguard California and Nationwide Destination go up and down completely randomly.

Pair Corralation between Vanguard California and Nationwide Destination

Assuming the 90 days horizon Vanguard California Long Term is expected to under-perform the Nationwide Destination. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard California Long Term is 3.29 times less risky than Nationwide Destination. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Nationwide Destination 2055 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,328  in Nationwide Destination 2055 on December 31, 2024 and sell it today you would lose (15.00) from holding Nationwide Destination 2055 or give up 1.13% of portfolio value over 90 days.

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

Vanguard California Long Term  vs.  Nationwide Destination 2055

Vanguard California

Risk-Adjusted Performance

Very Weak

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

Nationwide Destination

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nationwide Destination 2055 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nationwide Destination is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard California and Nationwide Destination

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

The idea behind Vanguard California Long Term and Nationwide Destination 2055 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.