Correlation Between Nuveen Dividend and Nuveen Municipal

Can any of the company-specific risk be diversified away by investing in both Nuveen Dividend 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 Dividend 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 Dividend Advantage and Nuveen Municipal Value, you can compare the effects of market volatilities on Nuveen Dividend 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 Dividend with a short position of Nuveen Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Dividend and Nuveen Municipal.

Diversification Opportunities for Nuveen Dividend and Nuveen Municipal

0.52

Correlation Coefficient

Nuveen Dividend  Nuveen Municipal

Very weak diversification

The 3 months correlation between Nuveen and Nuveen is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Dividend Advantage and Nuveen Municipal Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Municipal Value and Nuveen Dividend 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 Dividend Advantage 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 Value has no effect on the direction of Nuveen Dividend i.e., Nuveen Dividend and Nuveen Municipal go up and down completely randomly.

Pair Corralation between Nuveen Dividend and Nuveen Municipal

Considering the 90-day investment horizon Nuveen Dividend Advantage is expected to generate 1.22 times more return on investment than Nuveen Municipal. However, Nuveen Dividend is 1.22 times more volatile than Nuveen Municipal Value. It trades about 0.02 of its potential returns per unit of risk. Nuveen Municipal Value is currently generating about -0.01 per unit of risk. If you would invest  1,214  in Nuveen Dividend Advantage on September 13, 2024 and sell it today you would earn a total of  8.00  from holding Nuveen Dividend Advantage or generate 0.66% return on investment over 90 days.

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

Nuveen Dividend Advantage  vs.  Nuveen Municipal Value

Nuveen Dividend Advantage

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Dividend Advantage are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Nuveen Dividend is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Nuveen Municipal Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Municipal Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable basic indicators, Nuveen Municipal is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nuveen Dividend and Nuveen Municipal

The main advantage of trading using opposite Nuveen Dividend and Nuveen Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Dividend 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 Dividend Advantage and Nuveen Municipal Value 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.