Correlation Between Nuveen ESG and Xtrackers

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

By analyzing existing cross correlation between Nuveen ESG Large Cap and Xtrackers SP 500, you can compare the effects of market volatilities on Nuveen ESG and Xtrackers 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 Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen ESG and Xtrackers.

Diversification Opportunities for Nuveen ESG and Xtrackers

0.98

Correlation Coefficient

Nuveen ESG  Xtrackers

Almost no diversification

The 3 months correlation between Nuveen and Xtrackers is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG Large Cap and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 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 Large Cap are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Nuveen ESG i.e., Nuveen ESG and Xtrackers go up and down completely randomly.

Pair Corralation between Nuveen ESG and Xtrackers

Given the investment horizon of 90 days Nuveen ESG is expected to generate 1.14 times less return on investment than Xtrackers. In addition to that, Nuveen ESG is 1.02 times more volatile than Xtrackers SP 500. It trades about 0.15 of its total potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.17 per unit of volatility. If you would invest  5,134  in Xtrackers SP 500 on September 13, 2024 and sell it today you would earn a total of  381.00  from holding Xtrackers SP 500 or generate 7.42% return on investment over 90 days.

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

Nuveen ESG Large Cap  vs.  Xtrackers SP 500

Nuveen ESG Large

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG Large Cap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Nuveen ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xtrackers SP 500

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP 500 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Xtrackers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nuveen ESG and Xtrackers

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

The idea behind Nuveen ESG Large Cap and Xtrackers SP 500 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.