Correlation Between Nationwide Inflation-protec and Short Duration
Can any of the company-specific risk be diversified away by investing in both Nationwide Inflation-protec and Short Duration 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 Inflation-protec and Short Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nationwide Inflation Protected Securities and Short Duration Inflation, you can compare the effects of market volatilities on Nationwide Inflation-protec and Short Duration 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 Inflation-protec with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nationwide Inflation-protec and Short Duration.
Diversification Opportunities for Nationwide Inflation-protec and Short Duration
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nationwide and Short is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Inflation Protected and Short Duration Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Inflation and Nationwide Inflation-protec 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 Inflation Protected Securities are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Inflation has no effect on the direction of Nationwide Inflation-protec i.e., Nationwide Inflation-protec and Short Duration go up and down completely randomly.
Pair Corralation between Nationwide Inflation-protec and Short Duration
Assuming the 90 days horizon Nationwide Inflation Protected Securities is expected to under-perform the Short Duration. In addition to that, Nationwide Inflation-protec is 1.83 times more volatile than Short Duration Inflation. It trades about -0.08 of its total potential returns per unit of risk. Short Duration Inflation is currently generating about 0.13 per unit of volatility. If you would invest 1,030 in Short Duration Inflation on October 17, 2024 and sell it today you would earn a total of 4.00 from holding Short Duration Inflation or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nationwide Inflation Protected vs. Short Duration Inflation
Performance |
| Timeline |
| Nationwide Inflation-protec |
| Short Duration Inflation |
Nationwide Inflation-protec and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nationwide Inflation-protec and Short Duration
The main advantage of trading using opposite Nationwide Inflation-protec and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nationwide Inflation-protec position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.The idea behind Nationwide Inflation Protected Securities and Short Duration Inflation 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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