Correlation Between Nuveen Municipal and Aberdeen Global

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

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

Diversification Opportunities for Nuveen Municipal and Aberdeen Global

0.53

Correlation Coefficient

Nuveen Municipal  Aberdeen Global

Very weak diversification

The 3 months correlation between Nuveen and Aberdeen is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal Credit and Aberdeen Global IF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Global IF and Nuveen Municipal 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 Municipal Credit are associated (or correlated) with Aberdeen Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Global IF has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Aberdeen Global go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Aberdeen Global

Given the investment horizon of 90 days Nuveen Municipal is expected to generate 1.88 times less return on investment than Aberdeen Global. But when comparing it to its historical volatility, Nuveen Municipal Credit is 1.83 times less risky than Aberdeen Global. It trades about 0.11 of its potential returns per unit of risk. Aberdeen Global IF is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  565.00  in Aberdeen Global IF on December 29, 2024 and sell it today you would earn a total of  38.00  from holding Aberdeen Global IF or generate 6.73% return on investment over 90 days.

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

Nuveen Municipal Credit  vs.  Aberdeen Global IF

Nuveen Municipal Credit

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Municipal Credit are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy fundamental indicators, Nuveen Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Aberdeen Global IF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Global IF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Aberdeen Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nuveen Municipal and Aberdeen Global

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

The idea behind Nuveen Municipal Credit and Aberdeen Global IF 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.