Correlation Between Nuveen Municipal and Pimco Municipal

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

Diversification Opportunities for Nuveen Municipal and Pimco Municipal

0.32

Correlation Coefficient

Nuveen Municipal  Pimco Municipal

Weak diversification

The 3 months correlation between Nuveen and Pimco is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal High 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 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 High 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 Municipal i.e., Nuveen Municipal and Pimco Municipal go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Pimco Municipal

Considering the 90-day investment horizon Nuveen Municipal High is expected to under-perform the Pimco Municipal. But the fund apears to be less risky and, when comparing its historical volatility, Nuveen Municipal High is 1.62 times less risky than Pimco Municipal. The fund trades about -0.01 of its potential returns per unit of risk. The Pimco Municipal Income is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  967.00  in Pimco Municipal Income on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Pimco Municipal Income or generate 0.1% return on investment over 90 days.

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

Nuveen Municipal High  vs.  Pimco Municipal Income

Nuveen Municipal High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Municipal High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Nuveen Municipal 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

0 of 100

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 Municipal and Pimco Municipal

The main advantage of trading using opposite Nuveen Municipal and Pimco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Municipal 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 Municipal High 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.