Correlation Between Nuveen California and World Energy

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

By analyzing existing cross correlation between Nuveen California Municipal and World Energy Fund, you can compare the effects of market volatilities on Nuveen California and World Energy 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 California with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen California and World Energy.

Diversification Opportunities for Nuveen California and World Energy

0.18

Correlation Coefficient

Nuveen California  World Energy

Average diversification

The 3 months correlation between Nuveen and World is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Municipal and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Nuveen California 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 California Municipal are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Nuveen California i.e., Nuveen California and World Energy go up and down completely randomly.

Pair Corralation between Nuveen California and World Energy

Assuming the 90 days horizon Nuveen California Municipal is expected to under-perform the World Energy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nuveen California Municipal is 3.34 times less risky than World Energy. The mutual fund trades about -0.05 of its potential returns per unit of risk. The World Energy Fund is currently generating about 0.67 of returns per unit of risk over similar time horizon. If you would invest  1,435  in World Energy Fund on October 23, 2024 and sell it today you would earn a total of  144.00  from holding World Energy Fund or generate 10.03% return on investment over 90 days.

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

Nuveen California Municipal  vs.  World Energy Fund

Nuveen California

Risk-Adjusted Performance

0 of 100

Very Weak

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

World Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nuveen California and World Energy

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

The idea behind Nuveen California Municipal and World Energy Fund 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.