Correlation Between Nuveen California and Hennessy

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

Diversification Opportunities for Nuveen California and Hennessy

-0.48

Correlation Coefficient

Nuveen California  Hennessy

Very good diversification

The 3 months correlation between Nuveen and Hennessy is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Select and Hennessy Ad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Ad 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 Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Ad has no effect on the direction of Nuveen California i.e., Nuveen California and Hennessy go up and down completely randomly.

Pair Corralation between Nuveen California and Hennessy

Considering the 90-day investment horizon Nuveen California Select is expected to under-perform the Hennessy. But the stock apears to be less risky and, when comparing its historical volatility, Nuveen California Select is 3.65 times less risky than Hennessy. The stock trades about -0.03 of its potential returns per unit of risk. The Hennessy Ad is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  990.00  in Hennessy Ad on September 5, 2024 and sell it today you would earn a total of  229.00  from holding Hennessy Ad or generate 23.13% return on investment over 90 days.

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

Nuveen California Select  vs.  Hennessy Ad

Nuveen California Select

Risk-Adjusted Performance

0 of 100

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.

Hennessy Ad

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Ad are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Hennessy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuveen California and Hennessy

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

The idea behind Nuveen California Select and Hennessy Ad 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.