Correlation Between Nuveen New and Nuveen Municipal

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

Diversification Opportunities for Nuveen New and Nuveen Municipal

0.93

Correlation Coefficient

Nuveen New  Nuveen Municipal

Almost no diversification

The 3 months correlation between Nuveen and Nuveen is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen New York and Nuveen Municipal Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Municipal Credit and Nuveen New 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 New York 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 Credit has no effect on the direction of Nuveen New i.e., Nuveen New and Nuveen Municipal go up and down completely randomly.

Pair Corralation between Nuveen New and Nuveen Municipal

Considering the 90-day investment horizon Nuveen New is expected to generate 1.2 times less return on investment than Nuveen Municipal. But when comparing it to its historical volatility, Nuveen New York is 1.1 times less risky than Nuveen Municipal. It trades about 0.1 of its potential returns per unit of risk. Nuveen Municipal Credit is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,030  in Nuveen Municipal Credit on December 29, 2024 and sell it today you would earn a total of  37.00  from holding Nuveen Municipal Credit or generate 3.59% return on investment over 90 days.

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

Nuveen New York  vs.  Nuveen Municipal Credit

Nuveen New York

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen New York are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Nuveen New is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Nuveen Municipal Credit

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Municipal Credit are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy fundamental indicators, Nuveen Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nuveen New and Nuveen Municipal

The main advantage of trading using opposite Nuveen New and Nuveen Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen New 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 New York and Nuveen Municipal Credit 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.