Correlation Between Nuveen Dividend and Nuveen Select

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

Diversification Opportunities for Nuveen Dividend and Nuveen Select

0.19

Correlation Coefficient

Nuveen Dividend  Nuveen Select

Average diversification

The 3 months correlation between Nuveen and Nuveen is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Dividend Advantage and Nuveen Select Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Select Tax 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 Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Select Tax has no effect on the direction of Nuveen Dividend i.e., Nuveen Dividend and Nuveen Select go up and down completely randomly.

Pair Corralation between Nuveen Dividend and Nuveen Select

Considering the 90-day investment horizon Nuveen Dividend Advantage is expected to generate 0.88 times more return on investment than Nuveen Select. However, Nuveen Dividend Advantage is 1.13 times less risky than Nuveen Select. It trades about 0.04 of its potential returns per unit of risk. Nuveen Select Tax Free is currently generating about -0.06 per unit of risk. If you would invest  1,135  in Nuveen Dividend Advantage on December 27, 2024 and sell it today you would earn a total of  12.00  from holding Nuveen Dividend Advantage or generate 1.06% return on investment over 90 days.

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

Nuveen Dividend Advantage  vs.  Nuveen Select Tax Free

Nuveen Dividend Advantage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Dividend Advantage are ranked lower than 2 (%) 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 Select Tax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Select Tax Free has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nuveen Select is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nuveen Dividend and Nuveen Select

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

The idea behind Nuveen Dividend Advantage and Nuveen Select Tax Free 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.