Correlation Between Nuveen ESG and Vanguard Mid

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

Diversification Opportunities for Nuveen ESG and Vanguard Mid

0.87

Correlation Coefficient

Nuveen ESG  Vanguard Mid

Very poor diversification

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

Pair Corralation between Nuveen ESG and Vanguard Mid

Given the investment horizon of 90 days Nuveen ESG Mid Cap is expected to under-perform the Vanguard Mid. In addition to that, Nuveen ESG is 1.45 times more volatile than Vanguard Mid Cap Index. It trades about -0.12 of its total potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about -0.03 per unit of volatility. If you would invest  26,299  in Vanguard Mid Cap Index on December 29, 2024 and sell it today you would lose (587.00) from holding Vanguard Mid Cap Index or give up 2.23% of portfolio value over 90 days.

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

Nuveen ESG Mid Cap  vs.  Vanguard Mid Cap Index

Nuveen ESG Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen ESG Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nuveen ESG and Vanguard Mid

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

The idea behind Nuveen ESG Mid Cap and Vanguard Mid Cap Index 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.