Correlation Between IShares MSCI and Nuveen Preferred

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

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

Diversification Opportunities for IShares MSCI and Nuveen Preferred

0.09

Correlation Coefficient

IShares MSCI  Nuveen Preferred

Significant diversification

The 3 months correlation between IShares and Nuveen is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Hong and Nuveen Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Preferred and IShares MSCI 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 iShares MSCI Hong are associated (or correlated) with Nuveen Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Preferred has no effect on the direction of IShares MSCI i.e., IShares MSCI and Nuveen Preferred go up and down completely randomly.

Pair Corralation between IShares MSCI and Nuveen Preferred

Considering the 90-day investment horizon iShares MSCI Hong is expected to generate 2.24 times more return on investment than Nuveen Preferred. However, IShares MSCI is 2.24 times more volatile than Nuveen Preferred and. It trades about 0.11 of its potential returns per unit of risk. Nuveen Preferred and is currently generating about 0.11 per unit of risk. If you would invest  1,663  in iShares MSCI Hong on December 28, 2024 and sell it today you would earn a total of  118.00  from holding iShares MSCI Hong or generate 7.1% return on investment over 90 days.

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

iShares MSCI Hong  vs.  Nuveen Preferred and

iShares MSCI Hong

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Hong are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nuveen Preferred

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Preferred and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Nuveen Preferred is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares MSCI and Nuveen Preferred

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

The idea behind iShares MSCI Hong and Nuveen Preferred and 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.