Correlation Between Nuveen ESG and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Nuveen ESG and SPDR SP 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 SPDR SP 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 SPDR SP 400, you can compare the effects of market volatilities on Nuveen ESG and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen ESG and SPDR SP.

Diversification Opportunities for Nuveen ESG and SPDR SP

0.9

Correlation Coefficient

Nuveen ESG  SPDR SP

Almost no diversification

The 3 months correlation between Nuveen and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG Mid Cap and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 400 has no effect on the direction of Nuveen ESG i.e., Nuveen ESG and SPDR SP go up and down completely randomly.

Pair Corralation between Nuveen ESG and SPDR SP

Given the investment horizon of 90 days Nuveen ESG Mid Cap is expected to generate 0.66 times more return on investment than SPDR SP. However, Nuveen ESG Mid Cap is 1.52 times less risky than SPDR SP. It trades about -0.02 of its potential returns per unit of risk. SPDR SP 400 is currently generating about -0.09 per unit of risk. If you would invest  3,472  in Nuveen ESG Mid Cap on December 28, 2024 and sell it today you would lose (35.00) from holding Nuveen ESG Mid Cap or give up 1.01% of portfolio value over 90 days.

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

Nuveen ESG Mid Cap  vs.  SPDR SP 400

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. In spite of fairly stable primary indicators, Nuveen ESG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR SP 400

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 400 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic 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.

Pair Trading with Nuveen ESG and SPDR SP

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

The idea behind Nuveen ESG Mid Cap and SPDR SP 400 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.