Correlation Between Nuveen ESG and PowerShares Global

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

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

Diversification Opportunities for Nuveen ESG and PowerShares Global

0.78

Correlation Coefficient

Nuveen ESG  PowerShares Global

Poor diversification

The 3 months correlation between Nuveen and PowerShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG Mid Cap and PowerShares Global Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerShares Global Funds 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 Mid Cap are associated (or correlated) with PowerShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares Global Funds has no effect on the direction of Nuveen ESG i.e., Nuveen ESG and PowerShares Global go up and down completely randomly.

Pair Corralation between Nuveen ESG and PowerShares Global

Given the investment horizon of 90 days Nuveen ESG Mid Cap is expected to under-perform the PowerShares Global. In addition to that, Nuveen ESG is 1.2 times more volatile than PowerShares Global Funds. It trades about -0.24 of its total potential returns per unit of risk. PowerShares Global Funds is currently generating about -0.02 per unit of volatility. If you would invest  36,210  in PowerShares Global Funds on October 3, 2024 and sell it today you would lose (213.00) from holding PowerShares Global Funds or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Nuveen ESG Mid Cap  vs.  PowerShares Global Funds

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 fragile primary indicators, Nuveen ESG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PowerShares Global Funds

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Nuveen ESG and PowerShares Global

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

The idea behind Nuveen ESG Mid Cap and PowerShares Global Funds 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.