Correlation Between Nuveen Core and Nuveen Municipal

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

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

Diversification Opportunities for Nuveen Core and Nuveen Municipal

-0.38

Correlation Coefficient

Nuveen Core  Nuveen Municipal

Very good diversification

The 3 months correlation between Nuveen and Nuveen is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Core Equity and Nuveen Municipal Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Municipal Credit and Nuveen Core 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 Core Equity are associated (or correlated) with Nuveen Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Municipal Credit has no effect on the direction of Nuveen Core i.e., Nuveen Core and Nuveen Municipal go up and down completely randomly.

Pair Corralation between Nuveen Core and Nuveen Municipal

Considering the 90-day investment horizon Nuveen Core Equity is expected to generate 0.99 times more return on investment than Nuveen Municipal. However, Nuveen Core Equity is 1.01 times less risky than Nuveen Municipal. It trades about 0.18 of its potential returns per unit of risk. Nuveen Municipal Credit is currently generating about -0.15 per unit of risk. If you would invest  1,498  in Nuveen Core Equity on September 12, 2024 and sell it today you would earn a total of  116.00  from holding Nuveen Core Equity or generate 7.74% return on investment over 90 days.

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

Nuveen Core Equity  vs.  Nuveen Municipal Credit

Nuveen Core Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Core Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unsteady fundamental indicators, Nuveen Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nuveen Municipal Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Municipal Credit has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Nuveen Core and Nuveen Municipal

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

The idea behind Nuveen Core Equity and Nuveen Municipal Credit 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.