Correlation Between Nuveen Amt-free and Pimco Municipal

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

By analyzing existing cross correlation between Nuveen Amt Free Municipal and Pimco Municipal Income, you can compare the effects of market volatilities on Nuveen Amt-free and Pimco 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 Amt-free with a short position of Pimco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Amt-free and Pimco Municipal.

Diversification Opportunities for Nuveen Amt-free and Pimco Municipal

0.87

Correlation Coefficient

Nuveen Amt-free  Pimco Municipal

Very poor diversification

The 3 months correlation between Nuveen and Pimco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Amt Free Municipal and Pimco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Municipal Income and Nuveen Amt-free 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 Amt Free Municipal are associated (or correlated) with Pimco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Municipal Income has no effect on the direction of Nuveen Amt-free i.e., Nuveen Amt-free and Pimco Municipal go up and down completely randomly.

Pair Corralation between Nuveen Amt-free and Pimco Municipal

Considering the 90-day investment horizon Nuveen Amt-free is expected to generate 1.84 times less return on investment than Pimco Municipal. But when comparing it to its historical volatility, Nuveen Amt Free Municipal is 2.92 times less risky than Pimco Municipal. It trades about 0.34 of its potential returns per unit of risk. Pimco Municipal Income is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  896.00  in Pimco Municipal Income on December 3, 2024 and sell it today you would earn a total of  36.00  from holding Pimco Municipal Income or generate 4.02% return on investment over 90 days.

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

Nuveen Amt Free Municipal  vs.  Pimco Municipal Income

Nuveen Amt Free

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Amt Free Municipal has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong technical and fundamental indicators, Nuveen Amt-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Municipal Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Municipal Income has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable primary indicators, Pimco Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nuveen Amt-free and Pimco Municipal

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

The idea behind Nuveen Amt Free Municipal and Pimco Municipal Income 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.