Correlation Between Nuveen Small and Federated Mdt

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

Diversification Opportunities for Nuveen Small and Federated Mdt

0.94

Correlation Coefficient

Nuveen Small  Federated Mdt

Almost no diversification

The 3 months correlation between Nuveen and Federated is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Small Cap and Federated Mdt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Large 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Large has no effect on the direction of Nuveen Small i.e., Nuveen Small and Federated Mdt go up and down completely randomly.

Pair Corralation between Nuveen Small and Federated Mdt

Assuming the 90 days horizon Nuveen Small Cap is expected to generate 0.76 times more return on investment than Federated Mdt. However, Nuveen Small Cap is 1.31 times less risky than Federated Mdt. It trades about -0.08 of its potential returns per unit of risk. Federated Mdt Large is currently generating about -0.1 per unit of risk. If you would invest  3,148  in Nuveen Small Cap on December 21, 2024 and sell it today you would lose (163.00) from holding Nuveen Small Cap or give up 5.18% of portfolio value over 90 days.

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

Nuveen Small Cap  vs.  Federated Mdt Large

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 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.

Federated Mdt Large

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nuveen Small and Federated Mdt

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

The idea behind Nuveen Small Cap and Federated Mdt Large 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.