Correlation Between Dimensional International and Nuveen Sustainable

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

By analyzing existing cross correlation between Dimensional International High and Nuveen Sustainable Core, you can compare the effects of market volatilities on Dimensional International and Nuveen Sustainable 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 Dimensional International with a short position of Nuveen Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Nuveen Sustainable.

Diversification Opportunities for Dimensional International and Nuveen Sustainable

0.38

Correlation Coefficient

Dimensional International  Nuveen Sustainable

Weak diversification

The 3 months correlation between Dimensional and Nuveen is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and Nuveen Sustainable Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Sustainable Core and Dimensional International 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 Dimensional International High are associated (or correlated) with Nuveen Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Sustainable Core has no effect on the direction of Dimensional International i.e., Dimensional International and Nuveen Sustainable go up and down completely randomly.

Pair Corralation between Dimensional International and Nuveen Sustainable

Given the investment horizon of 90 days Dimensional International High is expected to generate 0.85 times more return on investment than Nuveen Sustainable. However, Dimensional International High is 1.18 times less risky than Nuveen Sustainable. It trades about 0.07 of its potential returns per unit of risk. Nuveen Sustainable Core is currently generating about -0.06 per unit of risk. If you would invest  2,617  in Dimensional International High on December 2, 2024 and sell it today you would earn a total of  82.00  from holding Dimensional International High or generate 3.13% return on investment over 90 days.

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

Dimensional International High  vs.  Nuveen Sustainable Core

Dimensional International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional International High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Dimensional International is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nuveen Sustainable Core

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dimensional International and Nuveen Sustainable

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

The idea behind Dimensional International High and Nuveen Sustainable Core 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.