Correlation Between Nuveen California and Ishares Municipal

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

Diversification Opportunities for Nuveen California and Ishares Municipal

0.98

Correlation Coefficient

Nuveen California  Ishares Municipal

Almost no diversification

The 3 months correlation between Nuveen and Ishares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Municipal and Ishares Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Municipal Bond 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 Ishares Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Municipal Bond has no effect on the direction of Nuveen California i.e., Nuveen California and Ishares Municipal go up and down completely randomly.

Pair Corralation between Nuveen California and Ishares Municipal

Assuming the 90 days horizon Nuveen California Municipal is expected to generate 0.99 times more return on investment than Ishares Municipal. However, Nuveen California Municipal is 1.01 times less risky than Ishares Municipal. It trades about 0.06 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.04 per unit of risk. If you would invest  994.00  in Nuveen California Municipal on December 22, 2024 and sell it today you would earn a total of  7.00  from holding Nuveen California Municipal or generate 0.7% return on investment over 90 days.

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

Nuveen California Municipal  vs.  Ishares Municipal Bond

Nuveen California

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen California Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Ishares Municipal Bond

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Municipal Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ishares Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuveen California and Ishares Municipal

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

The idea behind Nuveen California Municipal and Ishares Municipal Bond 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.