Correlation Between Nuveen Municipal and Western Asset

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

By analyzing existing cross correlation between Nuveen Municipal Value and Western Asset Managed, you can compare the effects of market volatilities on Nuveen Municipal and Western Asset 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 Municipal with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Municipal and Western Asset.

Diversification Opportunities for Nuveen Municipal and Western Asset

0.85

Correlation Coefficient

Nuveen Municipal  Western Asset

Very poor diversification

The 3 months correlation between Nuveen and Western is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal Value and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed and Nuveen Municipal 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 Municipal Value are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Western Asset go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Western Asset

Considering the 90-day investment horizon Nuveen Municipal Value is expected to under-perform the Western Asset. But the fund apears to be less risky and, when comparing its historical volatility, Nuveen Municipal Value is 1.36 times less risky than Western Asset. The fund trades about -0.13 of its potential returns per unit of risk. The Western Asset Managed is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,065  in Western Asset Managed on October 8, 2024 and sell it today you would lose (31.00) from holding Western Asset Managed or give up 2.91% of portfolio value over 90 days.

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

Nuveen Municipal Value  vs.  Western Asset Managed

Nuveen Municipal Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Municipal Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable basic indicators, Nuveen Municipal is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Western Asset Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable primary indicators, Western Asset is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nuveen Municipal and Western Asset

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

The idea behind Nuveen Municipal Value and Western Asset Managed 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.