Correlation Between Nuveen Municipal and Pimco Dynamic

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

Diversification Opportunities for Nuveen Municipal and Pimco Dynamic

0.78

Correlation Coefficient

Nuveen Municipal  Pimco Dynamic

Poor diversification

The 3 months correlation between Nuveen and Pimco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal Credit and Pimco Dynamic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Dynamic Income 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 Pimco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Dynamic Income has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Pimco Dynamic go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Pimco Dynamic

Given the investment horizon of 90 days Nuveen Municipal is expected to generate 1.11 times less return on investment than Pimco Dynamic. In addition to that, Nuveen Municipal is 1.24 times more volatile than Pimco Dynamic Income. It trades about 0.42 of its total potential returns per unit of risk. Pimco Dynamic Income is currently generating about 0.58 per unit of volatility. If you would invest  1,822  in Pimco Dynamic Income on October 23, 2024 and sell it today you would earn a total of  78.00  from holding Pimco Dynamic Income or generate 4.28% return on investment over 90 days.

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

Nuveen Municipal Credit  vs.  Pimco Dynamic Income

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.

Pimco Dynamic Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nuveen Municipal and Pimco Dynamic

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

The idea behind Nuveen Municipal Credit and Pimco Dynamic 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.