Correlation Between Nuveen Minnesota and Ariel International

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

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

Diversification Opportunities for Nuveen Minnesota and Ariel International

0.43

Correlation Coefficient

Nuveen Minnesota  Ariel International

Very weak diversification

The 3 months correlation between Nuveen and Ariel is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Minnesota Municipal and Ariel International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel International and Nuveen Minnesota 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 Minnesota Municipal are associated (or correlated) with Ariel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel International has no effect on the direction of Nuveen Minnesota i.e., Nuveen Minnesota and Ariel International go up and down completely randomly.

Pair Corralation between Nuveen Minnesota and Ariel International

Assuming the 90 days horizon Nuveen Minnesota Municipal is expected to under-perform the Ariel International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nuveen Minnesota Municipal is 4.31 times less risky than Ariel International. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Ariel International Fund is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,381  in Ariel International Fund on December 29, 2024 and sell it today you would earn a total of  175.00  from holding Ariel International Fund or generate 12.67% return on investment over 90 days.

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

Nuveen Minnesota Municipal  vs.  Ariel International Fund

Nuveen Minnesota Mun

Risk-Adjusted Performance

Very Weak

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

Ariel International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel International Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ariel International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuveen Minnesota and Ariel International

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

The idea behind Nuveen Minnesota Municipal and Ariel International Fund 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 Transaction History module to view history of all your transactions and understand their impact on performance.