Correlation Between Nuveen Floating and BlackRock Core

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

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

Diversification Opportunities for Nuveen Floating and BlackRock Core

0.44

Correlation Coefficient

Nuveen Floating  BlackRock Core

Very weak diversification

The 3 months correlation between Nuveen and BlackRock is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Floating Rate and BlackRock Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Core Bond and Nuveen Floating 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 Floating Rate are associated (or correlated) with BlackRock Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Core Bond has no effect on the direction of Nuveen Floating i.e., Nuveen Floating and BlackRock Core go up and down completely randomly.

Pair Corralation between Nuveen Floating and BlackRock Core

Considering the 90-day investment horizon Nuveen Floating Rate is expected to under-perform the BlackRock Core. But the fund apears to be less risky and, when comparing its historical volatility, Nuveen Floating Rate is 1.17 times less risky than BlackRock Core. The fund trades about -0.1 of its potential returns per unit of risk. The BlackRock Core Bond is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,104  in BlackRock Core Bond on November 28, 2024 and sell it today you would lose (34.00) from holding BlackRock Core Bond or give up 3.08% of portfolio value over 90 days.

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

Nuveen Floating Rate  vs.  BlackRock Core Bond

Nuveen Floating Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Floating Rate has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical and fundamental indicators, Nuveen Floating is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BlackRock Core Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Core Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, BlackRock Core is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nuveen Floating and BlackRock Core

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

The idea behind Nuveen Floating Rate and BlackRock Core Bond 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.