Correlation Between Nuveen Short and Western Asset

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

By analyzing existing cross correlation between Nuveen Short Term and Western Asset Short, you can compare the effects of market volatilities on Nuveen Short and Western Asset 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 Short with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Short and Western Asset.

Diversification Opportunities for Nuveen Short and Western Asset

0.93

Correlation Coefficient

Nuveen Short  Western Asset

Almost no diversification

The 3 months correlation between Nuveen and Western is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Short Term and Western Asset Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Short and Nuveen Short 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 Short Term are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Short has no effect on the direction of Nuveen Short i.e., Nuveen Short and Western Asset go up and down completely randomly.

Pair Corralation between Nuveen Short and Western Asset

Assuming the 90 days horizon Nuveen Short Term is expected to generate 0.75 times more return on investment than Western Asset. However, Nuveen Short Term is 1.33 times less risky than Western Asset. It trades about 0.22 of its potential returns per unit of risk. Western Asset Short is currently generating about 0.13 per unit of risk. If you would invest  975.00  in Nuveen Short Term on December 22, 2024 and sell it today you would earn a total of  10.00  from holding Nuveen Short Term or generate 1.03% return on investment over 90 days.

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

Nuveen Short Term  vs.  Western Asset Short

Nuveen Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Short Term are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Short

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Short are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Western Asset 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 Short and Western Asset

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

The idea behind Nuveen Short Term and Western Asset Short 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..