Correlation Between Nuveen ESG and IShares IBoxx

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

By analyzing existing cross correlation between Nuveen ESG High and iShares iBoxx Investment, you can compare the effects of market volatilities on Nuveen ESG and IShares IBoxx 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 IShares IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen ESG and IShares IBoxx.

Diversification Opportunities for Nuveen ESG and IShares IBoxx

0.87

Correlation Coefficient

Nuveen ESG  IShares IBoxx

Very poor diversification

The 3 months correlation between Nuveen and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG High and iShares iBoxx Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBoxx Investment 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 High are associated (or correlated) with IShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBoxx Investment has no effect on the direction of Nuveen ESG i.e., Nuveen ESG and IShares IBoxx go up and down completely randomly.

Pair Corralation between Nuveen ESG and IShares IBoxx

Given the investment horizon of 90 days Nuveen ESG is expected to generate 1.01 times less return on investment than IShares IBoxx. But when comparing it to its historical volatility, Nuveen ESG High is 1.19 times less risky than IShares IBoxx. It trades about 0.07 of its potential returns per unit of risk. iShares iBoxx Investment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,632  in iShares iBoxx Investment on December 28, 2024 and sell it today you would earn a total of  151.00  from holding iShares iBoxx Investment or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Nuveen ESG High  vs.  iShares iBoxx Investment

Nuveen ESG High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Nuveen ESG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares iBoxx Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBoxx Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares IBoxx is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nuveen ESG and IShares IBoxx

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

The idea behind Nuveen ESG High and iShares iBoxx Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.