Correlation Between Nuveen Preferred and Nuveen ESG

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

By analyzing existing cross correlation between Nuveen Preferred and and Nuveen ESG Mid Cap, you can compare the effects of market volatilities on Nuveen Preferred and Nuveen ESG 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 Preferred with a short position of Nuveen ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Preferred and Nuveen ESG.

Diversification Opportunities for Nuveen Preferred and Nuveen ESG

0.64

Correlation Coefficient

Nuveen Preferred  Nuveen ESG

Poor diversification

The 3 months correlation between Nuveen and Nuveen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Preferred and and Nuveen ESG Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Mid and Nuveen Preferred 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 Preferred and are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG Mid has no effect on the direction of Nuveen Preferred i.e., Nuveen Preferred and Nuveen ESG go up and down completely randomly.

Pair Corralation between Nuveen Preferred and Nuveen ESG

Given the investment horizon of 90 days Nuveen Preferred is expected to generate 1.7 times less return on investment than Nuveen ESG. But when comparing it to its historical volatility, Nuveen Preferred and is 8.17 times less risky than Nuveen ESG. It trades about 0.09 of its potential returns per unit of risk. Nuveen ESG Mid Cap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,743  in Nuveen ESG Mid Cap on October 7, 2024 and sell it today you would earn a total of  32.00  from holding Nuveen ESG Mid Cap or generate 0.67% return on investment over 90 days.

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

Nuveen Preferred and  vs.  Nuveen ESG Mid Cap

Nuveen Preferred

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Preferred and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Nuveen Preferred is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Nuveen ESG Mid

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG Mid Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Nuveen ESG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nuveen Preferred and Nuveen ESG

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

The idea behind Nuveen Preferred and and Nuveen ESG Mid Cap 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.