Correlation Between Nuveen High and Federated Max-cap

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

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

Diversification Opportunities for Nuveen High and Federated Max-cap

0.16

Correlation Coefficient

Nuveen High  Federated Max-cap

Average diversification

The 3 months correlation between Nuveen and Federated is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen High Income and Federated Max Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Max Cap and Nuveen High 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 High Income are associated (or correlated) with Federated Max-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Max Cap has no effect on the direction of Nuveen High i.e., Nuveen High and Federated Max-cap go up and down completely randomly.

Pair Corralation between Nuveen High and Federated Max-cap

Assuming the 90 days horizon Nuveen High Income is expected to generate 0.2 times more return on investment than Federated Max-cap. However, Nuveen High Income is 5.0 times less risky than Federated Max-cap. It trades about 0.06 of its potential returns per unit of risk. Federated Max Cap Index is currently generating about -0.09 per unit of risk. If you would invest  656.00  in Nuveen High Income on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Nuveen High Income or generate 0.76% return on investment over 90 days.

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

Nuveen High Income  vs.  Federated Max Cap Index

Nuveen High Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen High Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Nuveen High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Max Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Max Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Max-cap 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 High and Federated Max-cap

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

The idea behind Nuveen High Income and Federated Max Cap Index 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.