Correlation Between Western Asset and Nuveen Preferred

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

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

Diversification Opportunities for Western Asset and Nuveen Preferred

0.14

Correlation Coefficient

Western Asset  Nuveen Preferred

Average diversification

The 3 months correlation between Western and Nuveen is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Nuveen Preferred And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Preferred And and Western Asset 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 Western Asset High are associated (or correlated) with Nuveen Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Preferred And has no effect on the direction of Western Asset i.e., Western Asset and Nuveen Preferred go up and down completely randomly.

Pair Corralation between Western Asset and Nuveen Preferred

Considering the 90-day investment horizon Western Asset High is expected to generate 0.86 times more return on investment than Nuveen Preferred. However, Western Asset High is 1.16 times less risky than Nuveen Preferred. It trades about 0.03 of its potential returns per unit of risk. Nuveen Preferred And is currently generating about -0.03 per unit of risk. If you would invest  380.00  in Western Asset High on September 20, 2024 and sell it today you would earn a total of  43.00  from holding Western Asset High or generate 11.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	28.28%
Values	Daily Returns

Western Asset High  vs.  Nuveen Preferred And

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nuveen Preferred And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Preferred And has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Nuveen Preferred is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Asset and Nuveen Preferred

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

The idea behind Western Asset High and Nuveen Preferred And 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.