Correlation Between Nuveen Small and Nuveen California

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

Diversification Opportunities for Nuveen Small and Nuveen California

0.48

Correlation Coefficient

Nuveen Small  Nuveen California

Very weak diversification

The 3 months correlation between Nuveen and Nuveen is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Small Cap and Nuveen California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California 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 California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California has no effect on the direction of Nuveen Small i.e., Nuveen Small and Nuveen California go up and down completely randomly.

Pair Corralation between Nuveen Small and Nuveen California

Assuming the 90 days horizon Nuveen Small Cap is expected to generate 5.14 times more return on investment than Nuveen California. However, Nuveen Small is 5.14 times more volatile than Nuveen California Municipal. It trades about 0.04 of its potential returns per unit of risk. Nuveen California Municipal is currently generating about -0.03 per unit of risk. If you would invest  1,039  in Nuveen Small Cap on October 8, 2024 and sell it today you would earn a total of  29.00  from holding Nuveen Small Cap or generate 2.79% return on investment over 90 days.

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

Nuveen Small Cap  vs.  Nuveen California Municipal

Nuveen Small Cap

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuveen California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen California Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nuveen California 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 California

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

The idea behind Nuveen Small Cap and Nuveen California Municipal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.