Correlation Between Western Asset and Nuveen Core

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

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

Diversification Opportunities for Western Asset and Nuveen Core

-0.29

Correlation Coefficient

Western Asset  Nuveen Core

Very good diversification

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

Pair Corralation between Western Asset and Nuveen Core

Considering the 90-day investment horizon Western Asset Global is expected to under-perform the Nuveen Core. But the fund apears to be less risky and, when comparing its historical volatility, Western Asset Global is 1.13 times less risky than Nuveen Core. The fund trades about -0.01 of its potential returns per unit of risk. The Nuveen Core Equity is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,482  in Nuveen Core Equity on September 2, 2024 and sell it today you would earn a total of  91.00  from holding Nuveen Core Equity or generate 6.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Western Asset Global  vs.  Nuveen Core Equity

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Global has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong technical indicators, Western Asset is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Nuveen Core Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Core Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound fundamental indicators, Nuveen Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Asset and Nuveen Core

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

The idea behind Western Asset Global and Nuveen Core Equity 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 Stocks Directory module to find actively traded stocks across global markets.