Correlation Between Nuveen Floating and Nuveen Credit

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

Diversification Opportunities for Nuveen Floating and Nuveen Credit

0.67

Correlation Coefficient

Nuveen Floating  Nuveen Credit

Poor diversification

The 3 months correlation between Nuveen and Nuveen is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Floating Rate and Nuveen Credit Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Credit Strategies 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 Nuveen Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Credit Strategies has no effect on the direction of Nuveen Floating i.e., Nuveen Floating and Nuveen Credit go up and down completely randomly.

Pair Corralation between Nuveen Floating and Nuveen Credit

Considering the 90-day investment horizon Nuveen Floating Rate is expected to generate 0.89 times more return on investment than Nuveen Credit. However, Nuveen Floating Rate is 1.12 times less risky than Nuveen Credit. It trades about -0.11 of its potential returns per unit of risk. Nuveen Credit Strategies is currently generating about -0.11 per unit of risk. If you would invest  877.00  in Nuveen Floating Rate on December 28, 2024 and sell it today you would lose (34.00) from holding Nuveen Floating Rate or give up 3.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Nuveen Floating Rate  vs.  Nuveen Credit Strategies

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.

Nuveen Credit Strategies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Credit Strategies has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, Nuveen Credit is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nuveen Floating and Nuveen Credit

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

The idea behind Nuveen Floating Rate and Nuveen Credit Strategies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.