Correlation Between Western Asset and Nuveen SP

Can any of the company-specific risk be diversified away by investing in both Western Asset and Nuveen SP 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 SP 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 SP 500, you can compare the effects of market volatilities on Western Asset and Nuveen SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Nuveen SP.

Diversification Opportunities for Western Asset and Nuveen SP

-0.07

Correlation Coefficient

Western Asset  Nuveen SP

Good diversification

The 3 months correlation between Western and Nuveen is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Nuveen SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen SP 500 has no effect on the direction of Western Asset i.e., Western Asset and Nuveen SP go up and down completely randomly.

Pair Corralation between Western Asset and Nuveen SP

Considering the 90-day investment horizon Western Asset is expected to generate 4.01 times less return on investment than Nuveen SP. In addition to that, Western Asset is 1.9 times more volatile than Nuveen SP 500. It trades about 0.05 of its total potential returns per unit of risk. Nuveen SP 500 is currently generating about 0.39 per unit of volatility. If you would invest  1,731  in Nuveen SP 500 on September 12, 2024 and sell it today you would earn a total of  56.00  from holding Nuveen SP 500 or generate 3.24% 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 SP 500

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Nuveen SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nuveen SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Asset and Nuveen SP

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

The idea behind Western Asset Global and Nuveen SP 500 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.