Correlation Between Nuveen Municipal and Platinum Asia

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

Diversification Opportunities for Nuveen Municipal and Platinum Asia

0.44

Correlation Coefficient

Nuveen Municipal  Platinum Asia

Very weak diversification

The 3 months correlation between Nuveen and Platinum is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal Credit and Platinum Asia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asia Investments 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 Platinum Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asia Investments has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Platinum Asia go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Platinum Asia

Given the investment horizon of 90 days Nuveen Municipal Credit is expected to generate 0.65 times more return on investment than Platinum Asia. However, Nuveen Municipal Credit is 1.55 times less risky than Platinum Asia. It trades about 0.46 of its potential returns per unit of risk. Platinum Asia Investments is currently generating about 0.06 per unit of risk. If you would invest  1,039  in Nuveen Municipal Credit on October 24, 2024 and sell it today you would earn a total of  44.00  from holding Nuveen Municipal Credit or generate 4.23% 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.  Platinum Asia Investments

Nuveen Municipal Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Municipal Credit has generated negative risk-adjusted returns adding no value to fund investors. 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.

Platinum Asia Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Platinum Asia Investments has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong basic indicators, Platinum Asia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nuveen Municipal and Platinum Asia

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

The idea behind Nuveen Municipal Credit and Platinum Asia Investments 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.