Correlation Between Nationwide International and Small Cap
Can any of the company-specific risk be diversified away by investing in both Nationwide International and Small Cap 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 International and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nationwide International Index and Small Cap Equity, you can compare the effects of market volatilities on Nationwide International and Small Cap 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 International with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nationwide International and Small Cap.
Diversification Opportunities for Nationwide International and Small Cap
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nationwide and Small is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide International Index and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Nationwide International 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 International Index are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Nationwide International i.e., Nationwide International and Small Cap go up and down completely randomly.
Pair Corralation between Nationwide International and Small Cap
Assuming the 90 days horizon Nationwide International is expected to generate 2.01 times less return on investment than Small Cap. But when comparing it to its historical volatility, Nationwide International Index is 1.48 times less risky than Small Cap. It trades about 0.05 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,595 in Small Cap Equity on September 2, 2024 and sell it today you would earn a total of 436.00 from holding Small Cap Equity or generate 27.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nationwide International Index vs. Small Cap Equity
Performance |
| Timeline |
| Nationwide International |
| Small Cap Equity |
Nationwide International and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nationwide International and Small Cap
The main advantage of trading using opposite Nationwide International and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nationwide International position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Nationwide International vs. Rbc Funds Trust | Nationwide International vs. Bbh Partner Fund | Nationwide International vs. Growth Opportunities Fund | Nationwide International vs. Commonwealth Global Fund |
| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
Check out your portfolio center.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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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