Correlation Between Health Care and Nationwide Investor
Can any of the company-specific risk be diversified away by investing in both Health Care and Nationwide Investor 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 Health Care and Nationwide Investor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Fund and Nationwide Investor Destinations, you can compare the effects of market volatilities on Health Care and Nationwide Investor 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 Health Care with a short position of Nationwide Investor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Nationwide Investor.
Diversification Opportunities for Health Care and Nationwide Investor
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between HEALTH and Nationwide is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Nationwide Investor Destinatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Investor and Health Care 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 Health Care Fund are associated (or correlated) with Nationwide Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Investor has no effect on the direction of Health Care i.e., Health Care and Nationwide Investor go up and down completely randomly.
Pair Corralation between Health Care and Nationwide Investor
Assuming the 90 days horizon Health Care Fund is expected to under-perform the Nationwide Investor. In addition to that, Health Care is 2.18 times more volatile than Nationwide Investor Destinations. It trades about -0.09 of its total potential returns per unit of risk. Nationwide Investor Destinations is currently generating about 0.13 per unit of volatility. If you would invest 1,023 in Nationwide Investor Destinations on September 2, 2024 and sell it today you would earn a total of 29.00 from holding Nationwide Investor Destinations or generate 2.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Fund vs. Nationwide Investor Destinatio
Performance |
| Timeline |
| Health Care Fund |
| Nationwide Investor |
Health Care and Nationwide Investor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Nationwide Investor
The main advantage of trading using opposite Health Care and Nationwide Investor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Nationwide Investor 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 Investor will offset losses from the drop in Nationwide Investor's long position.| Health Care vs. Banking Fund Class | Health Care vs. Basic Materials Fund | Health Care vs. Biotechnology Fund Class | Health Care vs. Government Long Bond |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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