Correlation Between Nuveen California and Pimco Investment

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

Diversification Opportunities for Nuveen California and Pimco Investment

0.69

Correlation Coefficient

Nuveen California  Pimco Investment

Poor diversification

The 3 months correlation between Nuveen and Pimco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Municipal and Pimco Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Investment Grade 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 Pimco Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Investment Grade has no effect on the direction of Nuveen California i.e., Nuveen California and Pimco Investment go up and down completely randomly.

Pair Corralation between Nuveen California and Pimco Investment

Assuming the 90 days horizon Nuveen California is expected to generate 4.76 times less return on investment than Pimco Investment. But when comparing it to its historical volatility, Nuveen California Municipal is 1.54 times less risky than Pimco Investment. It trades about 0.06 of its potential returns per unit of risk. Pimco Investment Grade is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  877.00  in Pimco Investment Grade on December 21, 2024 and sell it today you would earn a total of  30.00  from holding Pimco Investment Grade or generate 3.42% return on investment over 90 days.

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

Nuveen California Municipal  vs.  Pimco Investment Grade

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.

Pimco Investment Grade

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Investment Grade are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Investment 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 Pimco Investment

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

The idea behind Nuveen California Municipal and Pimco Investment Grade 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.