Correlation Between Western Asset and Nuveen Core

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

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

Diversification Opportunities for Western Asset and Nuveen Core

0.24

Correlation Coefficient

Western Asset  Nuveen Core

Modest diversification

The 3 months correlation between Western and Nuveen is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Managed and Nuveen Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Core Equity 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 Managed are associated (or correlated) with Nuveen Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Core Equity has no effect on the direction of Western Asset i.e., Western Asset and Nuveen Core go up and down completely randomly.

Pair Corralation between Western Asset and Nuveen Core

Considering the 90-day investment horizon Western Asset Managed is expected to generate 0.61 times more return on investment than Nuveen Core. However, Western Asset Managed is 1.63 times less risky than Nuveen Core. It trades about 0.04 of its potential returns per unit of risk. Nuveen Core Equity is currently generating about -0.08 per unit of risk. If you would invest  1,002  in Western Asset Managed on December 20, 2024 and sell it today you would earn a total of  12.00  from holding Western Asset Managed or generate 1.2% return on investment over 90 days.

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

Western Asset Managed  vs.  Nuveen Core Equity

Western Asset Managed

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Managed are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable primary indicators, Western Asset is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 rather sound fundamental indicators, Nuveen Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Asset and Nuveen Core

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

The idea behind Western Asset Managed and Nuveen Core Equity 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.