Correlation Between Vanguard Municipal and Nationwide Small

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

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

Diversification Opportunities for Vanguard Municipal and Nationwide Small

0.0

Correlation Coefficient

Vanguard Municipal  Nationwide Small

Pay attention - limited upside

The 3 months correlation between Vanguard and Nationwide is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Municipal Bond and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap and Vanguard Municipal 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 Municipal Bond are associated (or correlated) with Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Vanguard Municipal i.e., Vanguard Municipal and Nationwide Small go up and down completely randomly.

Pair Corralation between Vanguard Municipal and Nationwide Small

If you would invest  100.00  in Vanguard Municipal Bond on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Vanguard Municipal Bond or generate 0.0% return on investment over 90 days.

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

Vanguard Municipal Bond  vs.  Nationwide Small Cap

Vanguard Municipal Bond

Risk-Adjusted Performance

Very Weak

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

Nationwide Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nationwide Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vanguard Municipal and Nationwide Small

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

The idea behind Vanguard Municipal Bond and Nationwide Small Cap 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 Global Correlations module to find global opportunities by holding instruments from different markets.