Correlation Between Nuveen Core and Small Cap

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

Diversification Opportunities for Nuveen Core and Small Cap

0.91

Correlation Coefficient

Nuveen Core  Small Cap

Almost no diversification

The 3 months correlation between Nuveen and Small is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Core Equity and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Nuveen Core i.e., Nuveen Core and Small Cap go up and down completely randomly.

Pair Corralation between Nuveen Core and Small Cap

Considering the 90-day investment horizon Nuveen Core Equity is expected to generate 0.74 times more return on investment than Small Cap. However, Nuveen Core Equity is 1.34 times less risky than Small Cap. It trades about -0.11 of its potential returns per unit of risk. Small Cap Core is currently generating about -0.12 per unit of risk. If you would invest  1,538  in Nuveen Core Equity on December 28, 2024 and sell it today you would lose (96.00) from holding Nuveen Core Equity or give up 6.24% of portfolio value over 90 days.

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

Nuveen Core Equity  vs.  Small Cap Core

Nuveen Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Core Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest fragile performance, the Fund's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Small Cap Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Core and Small Cap

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

The idea behind Nuveen Core Equity and Small Cap Core 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.