Correlation Between Nuveen Small and Nuveen Large

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

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

Diversification Opportunities for Nuveen Small and Nuveen Large

0.89

Correlation Coefficient

Nuveen Small  Nuveen Large

Very poor diversification

The 3 months correlation between Nuveen and Nuveen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Small Cap and Nuveen Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Large Cap and Nuveen Small 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 Nuveen Small Cap are associated (or correlated) with Nuveen Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Large Cap has no effect on the direction of Nuveen Small i.e., Nuveen Small and Nuveen Large go up and down completely randomly.

Pair Corralation between Nuveen Small and Nuveen Large

Assuming the 90 days horizon Nuveen Small Cap is expected to under-perform the Nuveen Large. In addition to that, Nuveen Small is 1.14 times more volatile than Nuveen Large Cap. It trades about -0.11 of its total potential returns per unit of risk. Nuveen Large Cap is currently generating about -0.09 per unit of volatility. If you would invest  4,116  in Nuveen Large Cap on December 20, 2024 and sell it today you would lose (235.00) from holding Nuveen Large Cap or give up 5.71% of portfolio value over 90 days.

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

Nuveen Small Cap  vs.  Nuveen Large Cap

Nuveen Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Nuveen Large Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nuveen Small and Nuveen Large

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

The idea behind Nuveen Small Cap and Nuveen Large Cap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.