Correlation Between Nationwide Investor and Vanguard Strategic

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

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

Diversification Opportunities for Nationwide Investor and Vanguard Strategic

0.88

Correlation Coefficient

Nationwide Investor  Vanguard Strategic

Very poor diversification

The 3 months correlation between Nationwide and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Investor Destinatio and Vanguard Strategic Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Strategic and Nationwide Investor 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 Nationwide Investor Destinations are associated (or correlated) with Vanguard Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Strategic has no effect on the direction of Nationwide Investor i.e., Nationwide Investor and Vanguard Strategic go up and down completely randomly.

Pair Corralation between Nationwide Investor and Vanguard Strategic

Assuming the 90 days horizon Nationwide Investor is expected to generate 3.12 times less return on investment than Vanguard Strategic. But when comparing it to its historical volatility, Nationwide Investor Destinations is 2.76 times less risky than Vanguard Strategic. It trades about 0.16 of its potential returns per unit of risk. Vanguard Strategic Small Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,108  in Vanguard Strategic Small Cap on September 2, 2024 and sell it today you would earn a total of  578.00  from holding Vanguard Strategic Small Cap or generate 14.07% return on investment over 90 days.

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

Nationwide Investor Destinatio  vs.  Vanguard Strategic Small Cap

Nationwide Investor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Investor Destinations are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Nationwide Investor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Strategic

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Strategic Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard Strategic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nationwide Investor and Vanguard Strategic

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

The idea behind Nationwide Investor Destinations and Vanguard Strategic 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.