Correlation Between American Funds and Nuveen Minnesota

Can any of the company-specific risk be diversified away by investing in both American Funds and Nuveen Minnesota 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 American Funds and Nuveen Minnesota into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Funds 2040 and Nuveen Minnesota Municipal, you can compare the effects of market volatilities on American Funds and Nuveen Minnesota 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 American Funds with a short position of Nuveen Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Nuveen Minnesota.

Diversification Opportunities for American Funds and Nuveen Minnesota

0.3

Correlation Coefficient

American Funds  Nuveen Minnesota

Weak diversification

The 3 months correlation between American and Nuveen is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2040 and Nuveen Minnesota Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Minnesota Mun and American Funds 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 American Funds 2040 are associated (or correlated) with Nuveen Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Minnesota Mun has no effect on the direction of American Funds i.e., American Funds and Nuveen Minnesota go up and down completely randomly.

Pair Corralation between American Funds and Nuveen Minnesota

Assuming the 90 days horizon American Funds 2040 is expected to generate 3.37 times more return on investment than Nuveen Minnesota. However, American Funds is 3.37 times more volatile than Nuveen Minnesota Municipal. It trades about 0.0 of its potential returns per unit of risk. Nuveen Minnesota Municipal is currently generating about -0.03 per unit of risk. If you would invest  1,999  in American Funds 2040 on December 29, 2024 and sell it today you would earn a total of  1.00  from holding American Funds 2040 or generate 0.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Funds 2040  vs.  Nuveen Minnesota Municipal

American Funds 2040

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Funds 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuveen Minnesota Mun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Minnesota Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nuveen Minnesota is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Funds and Nuveen Minnesota

The main advantage of trading using opposite American Funds and Nuveen Minnesota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Nuveen Minnesota 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 Nuveen Minnesota will offset losses from the drop in Nuveen Minnesota's long position.

The idea behind American Funds 2040 and Nuveen Minnesota Municipal 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.