Correlation Between Nuveen Core and Western Asset

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

By analyzing existing cross correlation between Nuveen Core Plus and Western Asset High, you can compare the effects of market volatilities on Nuveen Core and Western Asset 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 Core with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Core and Western Asset.

Diversification Opportunities for Nuveen Core and Western Asset

0.29

Correlation Coefficient

Nuveen Core  Western Asset

Modest diversification

The 3 months correlation between Nuveen and Western is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Core Plus and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Nuveen Core 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 Core Plus are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Nuveen Core i.e., Nuveen Core and Western Asset go up and down completely randomly.

Pair Corralation between Nuveen Core and Western Asset

Given the investment horizon of 90 days Nuveen Core Plus is expected to generate 0.74 times more return on investment than Western Asset. However, Nuveen Core Plus is 1.35 times less risky than Western Asset. It trades about 0.07 of its potential returns per unit of risk. Western Asset High is currently generating about 0.03 per unit of risk. If you would invest  832.00  in Nuveen Core Plus on September 20, 2024 and sell it today you would earn a total of  232.00  from holding Nuveen Core Plus or generate 27.88% return on investment over 90 days.

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

Nuveen Core Plus  vs.  Western Asset High

Nuveen Core Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Core Plus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Nuveen Core is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuveen Core and Western Asset

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

The idea behind Nuveen Core Plus and Western Asset High 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.