Correlation Between Nuveen Preferred and Invesco Preferred

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

Diversification Opportunities for Nuveen Preferred and Invesco Preferred

-0.07

Correlation Coefficient

Nuveen Preferred  Invesco Preferred

Good diversification

The 3 months correlation between Nuveen and Invesco is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Preferred and and Invesco Preferred ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Preferred ETF 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 Invesco Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Preferred ETF has no effect on the direction of Nuveen Preferred i.e., Nuveen Preferred and Invesco Preferred go up and down completely randomly.

Pair Corralation between Nuveen Preferred and Invesco Preferred

Given the investment horizon of 90 days Nuveen Preferred is expected to generate 11.35 times less return on investment than Invesco Preferred. But when comparing it to its historical volatility, Nuveen Preferred and is 4.92 times less risky than Invesco Preferred. It trades about 0.06 of its potential returns per unit of risk. Invesco Preferred ETF is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,140  in Invesco Preferred ETF on October 26, 2024 and sell it today you would earn a total of  25.00  from holding Invesco Preferred ETF or generate 2.19% return on investment over 90 days.

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

Nuveen Preferred and  vs.  Invesco Preferred ETF

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.

Invesco Preferred ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Preferred ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Invesco Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuveen Preferred and Invesco Preferred

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

The idea behind Nuveen Preferred and and Invesco Preferred ETF 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .