Correlation Between Nuveen Arizona and GCM Grosvenor

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

By analyzing existing cross correlation between Nuveen Arizona Quality and GCM Grosvenor, you can compare the effects of market volatilities on Nuveen Arizona and GCM Grosvenor 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 Arizona with a short position of GCM Grosvenor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Arizona and GCM Grosvenor.

Diversification Opportunities for Nuveen Arizona and GCM Grosvenor

0.5

Correlation Coefficient

Nuveen Arizona  GCM Grosvenor

Very weak diversification

The 3 months correlation between Nuveen and GCM is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Arizona Quality and GCM Grosvenor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Grosvenor and Nuveen Arizona 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 Arizona Quality are associated (or correlated) with GCM Grosvenor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Grosvenor has no effect on the direction of Nuveen Arizona i.e., Nuveen Arizona and GCM Grosvenor go up and down completely randomly.

Pair Corralation between Nuveen Arizona and GCM Grosvenor

Considering the 90-day investment horizon Nuveen Arizona is expected to generate 203.92 times less return on investment than GCM Grosvenor. But when comparing it to its historical volatility, Nuveen Arizona Quality is 142.56 times less risky than GCM Grosvenor. It trades about 0.06 of its potential returns per unit of risk. GCM Grosvenor is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  73.00  in GCM Grosvenor on September 4, 2024 and sell it today you would earn a total of  41.00  from holding GCM Grosvenor or generate 56.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.83%
Values	Daily Returns

Nuveen Arizona Quality  vs.  GCM Grosvenor

Nuveen Arizona Quality

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Arizona Quality are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nuveen Arizona may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GCM Grosvenor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, GCM Grosvenor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuveen Arizona and GCM Grosvenor

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

The idea behind Nuveen Arizona Quality and GCM Grosvenor 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.