Correlation Between Capital One and Nuveen Select

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

By analyzing existing cross correlation between Capital One Financial and Nuveen Select Tax Free, you can compare the effects of market volatilities on Capital One and Nuveen Select 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 Capital One with a short position of Nuveen Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Nuveen Select.

Diversification Opportunities for Capital One and Nuveen Select

0.29

Correlation Coefficient

Capital One  Nuveen Select

Modest diversification

The 3 months correlation between Capital and Nuveen is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Nuveen Select Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Select Tax and Capital One 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 Capital One Financial are associated (or correlated) with Nuveen Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Select Tax has no effect on the direction of Capital One i.e., Capital One and Nuveen Select go up and down completely randomly.

Pair Corralation between Capital One and Nuveen Select

Considering the 90-day investment horizon Capital One Financial is expected to generate 2.72 times more return on investment than Nuveen Select. However, Capital One is 2.72 times more volatile than Nuveen Select Tax Free. It trades about -0.03 of its potential returns per unit of risk. Nuveen Select Tax Free is currently generating about -0.08 per unit of risk. If you would invest  20,311  in Capital One Financial on December 2, 2024 and sell it today you would lose (256.00) from holding Capital One Financial or give up 1.26% of portfolio value over 90 days.

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

Capital One Financial  vs.  Nuveen Select Tax Free

Capital One Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Capital One may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nuveen Select Tax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Select Tax Free has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nuveen Select is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Capital One and Nuveen Select

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

The idea behind Capital One Financial and Nuveen Select Tax Free 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.