Correlation Between Nuveen California and Guardian Capital

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

By analyzing existing cross correlation between Nuveen California Select and Guardian Capital Group, you can compare the effects of market volatilities on Nuveen California and Guardian Capital 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 California with a short position of Guardian Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen California and Guardian Capital.

Diversification Opportunities for Nuveen California and Guardian Capital

0.14

Correlation Coefficient

Nuveen California  Guardian Capital

Average diversification

The 3 months correlation between Nuveen and Guardian is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Select and Guardian Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Capital and Nuveen California 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 California Select are associated (or correlated) with Guardian Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Capital has no effect on the direction of Nuveen California i.e., Nuveen California and Guardian Capital go up and down completely randomly.

Pair Corralation between Nuveen California and Guardian Capital

Considering the 90-day investment horizon Nuveen California Select is expected to under-perform the Guardian Capital. But the stock apears to be less risky and, when comparing its historical volatility, Nuveen California Select is 4.15 times less risky than Guardian Capital. The stock trades about -0.09 of its potential returns per unit of risk. The Guardian Capital Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,954  in Guardian Capital Group on November 28, 2024 and sell it today you would earn a total of  81.00  from holding Guardian Capital Group or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.1%
Values	Daily Returns

Nuveen California Select  vs.  Guardian Capital Group

Nuveen California Select

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen California Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nuveen California is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Guardian Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Capital Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Guardian Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nuveen California and Guardian Capital

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

The idea behind Nuveen California Select and Guardian Capital Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.