Correlation Between Small Cap and Nationwide International
Can any of the company-specific risk be diversified away by investing in both Small Cap and Nationwide International 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 Small Cap and Nationwide International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Nationwide International Index, you can compare the effects of market volatilities on Small Cap and Nationwide International 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 Small Cap with a short position of Nationwide International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Nationwide International.
Diversification Opportunities for Small Cap and Nationwide International
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Nationwide is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Nationwide International Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide International and Small Cap 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 Small Cap Stock are associated (or correlated) with Nationwide International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide International has no effect on the direction of Small Cap i.e., Small Cap and Nationwide International go up and down completely randomly.
Pair Corralation between Small Cap and Nationwide International
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.55 times more return on investment than Nationwide International. However, Small Cap is 1.55 times more volatile than Nationwide International Index. It trades about 0.05 of its potential returns per unit of risk. Nationwide International Index is currently generating about 0.05 per unit of risk. If you would invest 1,138 in Small Cap Stock on August 26, 2024 and sell it today you would earn a total of 375.00 from holding Small Cap Stock or generate 32.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Nationwide International Index
Performance |
| Timeline |
| Small Cap Stock |
| Nationwide International |
Small Cap and Nationwide International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Nationwide International
The main advantage of trading using opposite Small Cap and Nationwide International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Nationwide International 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 International will offset losses from the drop in Nationwide International's long position.| Small Cap vs. Victory Rs Growth | Small Cap vs. Praxis Growth Index | Small Cap vs. Qs Moderate Growth | Small Cap vs. T Rowe Price |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |