Correlation Between Nuveen ESG and RiverFront Dynamic

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

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

Diversification Opportunities for Nuveen ESG and RiverFront Dynamic

0.98

Correlation Coefficient

Nuveen ESG  RiverFront Dynamic

Almost no diversification

The 3 months correlation between Nuveen and RiverFront is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG Aggregate and RiverFront Dynamic Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic Core and Nuveen ESG 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 ESG Aggregate are associated (or correlated) with RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic Core has no effect on the direction of Nuveen ESG i.e., Nuveen ESG and RiverFront Dynamic go up and down completely randomly.

Pair Corralation between Nuveen ESG and RiverFront Dynamic

Given the investment horizon of 90 days Nuveen ESG is expected to generate 1.27 times less return on investment than RiverFront Dynamic. In addition to that, Nuveen ESG is 1.18 times more volatile than RiverFront Dynamic Core. It trades about 0.04 of its total potential returns per unit of risk. RiverFront Dynamic Core is currently generating about 0.06 per unit of volatility. If you would invest  2,064  in RiverFront Dynamic Core on September 12, 2024 and sell it today you would earn a total of  198.80  from holding RiverFront Dynamic Core or generate 9.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Nuveen ESG Aggregate  vs.  RiverFront Dynamic Core

Nuveen ESG Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen ESG Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Nuveen ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

RiverFront Dynamic Core

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nuveen ESG and RiverFront Dynamic

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

The idea behind Nuveen ESG Aggregate and RiverFront Dynamic Core 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.