Correlation Between Nationwide Government and Nationwide Bond
Can any of the company-specific risk be diversified away by investing in both Nationwide Government and Nationwide Bond 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 Government and Nationwide Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nationwide Government Bond and Nationwide Bond Fund, you can compare the effects of market volatilities on Nationwide Government and Nationwide Bond 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 Government with a short position of Nationwide Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nationwide Government and Nationwide Bond.
Diversification Opportunities for Nationwide Government and Nationwide Bond
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nationwide and Nationwide is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Government Bond and Nationwide Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Bond and Nationwide Government 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 Government Bond are associated (or correlated) with Nationwide Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Bond has no effect on the direction of Nationwide Government i.e., Nationwide Government and Nationwide Bond go up and down completely randomly.
Pair Corralation between Nationwide Government and Nationwide Bond
Assuming the 90 days horizon Nationwide Government is expected to generate 1.32 times less return on investment than Nationwide Bond. But when comparing it to its historical volatility, Nationwide Government Bond is 9.79 times less risky than Nationwide Bond. It trades about 0.46 of its potential returns per unit of risk. Nationwide Bond Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 817.00 in Nationwide Bond Fund on August 30, 2024 and sell it today you would earn a total of 4.00 from holding Nationwide Bond Fund or generate 0.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nationwide Government Bond vs. Nationwide Bond Fund
Performance |
| Timeline |
| Nationwide Government |
| Nationwide Bond |
Nationwide Government and Nationwide Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nationwide Government and Nationwide Bond
The main advantage of trading using opposite Nationwide Government and Nationwide Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nationwide Government position performs unexpectedly, Nationwide Bond 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 Bond will offset losses from the drop in Nationwide Bond's long position.The idea behind Nationwide Government Bond and Nationwide Bond Fund 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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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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