Correlation Between Large Cap and Nuveen Real

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

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

Diversification Opportunities for Large Cap and Nuveen Real

0.7

Correlation Coefficient

Large Cap  Nuveen Real

Poor diversification

The 3 months correlation between Large and Nuveen is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund and Nuveen Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Real Estate and Large Cap 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 Large Cap Fund are associated (or correlated) with Nuveen Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Real Estate has no effect on the direction of Large Cap i.e., Large Cap and Nuveen Real go up and down completely randomly.

Pair Corralation between Large Cap and Nuveen Real

Assuming the 90 days horizon Large Cap Fund is expected to under-perform the Nuveen Real. But the mutual fund apears to be less risky and, when comparing its historical volatility, Large Cap Fund is 1.23 times less risky than Nuveen Real. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Nuveen Real Estate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Nuveen Real Estate on December 21, 2024 and sell it today you would earn a total of  19.00  from holding Nuveen Real Estate or generate 1.31% return on investment over 90 days.

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

Large Cap Fund  vs.  Nuveen Real Estate

Large Cap Fund

Risk-Adjusted Performance

Very Weak

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

Nuveen Real Estate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Real Estate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large Cap and Nuveen Real

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

The idea behind Large Cap Fund and Nuveen Real Estate 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.

Check out your portfolio center.

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.