Correlation Between Nuveen Enhanced and IShares IBonds

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

By analyzing existing cross correlation between Nuveen Enhanced Yield and iShares iBonds Dec, you can compare the effects of market volatilities on Nuveen Enhanced and IShares IBonds 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 Enhanced with a short position of IShares IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Enhanced and IShares IBonds.

Diversification Opportunities for Nuveen Enhanced and IShares IBonds

0.98

Correlation Coefficient

Nuveen Enhanced  IShares IBonds

Almost no diversification

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

Pair Corralation between Nuveen Enhanced and IShares IBonds

Given the investment horizon of 90 days Nuveen Enhanced Yield is expected to generate 2.11 times more return on investment than IShares IBonds. However, Nuveen Enhanced is 2.11 times more volatile than iShares iBonds Dec. It trades about 0.26 of its potential returns per unit of risk. iShares iBonds Dec is currently generating about 0.34 per unit of risk. If you would invest  2,278  in Nuveen Enhanced Yield on December 28, 2024 and sell it today you would earn a total of  44.00  from holding Nuveen Enhanced Yield or generate 1.93% return on investment over 90 days.

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

Nuveen Enhanced Yield  vs.  iShares iBonds Dec

Nuveen Enhanced Yield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Enhanced Yield are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nuveen Enhanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares iBonds Dec

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, IShares IBonds is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nuveen Enhanced and IShares IBonds

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

The idea behind Nuveen Enhanced Yield and iShares iBonds Dec 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.