Correlation Between Nuveen California and Nuveen Mortgage

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

Diversification Opportunities for Nuveen California and Nuveen Mortgage

0.49

Correlation Coefficient

Nuveen California  Nuveen Mortgage

Very weak diversification

The 3 months correlation between Nuveen and Nuveen is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Select and Nuveen Mortgage Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Mortgage Oppo 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 Nuveen Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Mortgage Oppo has no effect on the direction of Nuveen California i.e., Nuveen California and Nuveen Mortgage go up and down completely randomly.

Pair Corralation between Nuveen California and Nuveen Mortgage

Considering the 90-day investment horizon Nuveen California Select is expected to under-perform the Nuveen Mortgage. But the stock apears to be less risky and, when comparing its historical volatility, Nuveen California Select is 1.11 times less risky than Nuveen Mortgage. The stock trades about -0.01 of its potential returns per unit of risk. The Nuveen Mortgage Opportunity is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,762  in Nuveen Mortgage Opportunity on December 21, 2024 and sell it today you would earn a total of  113.00  from holding Nuveen Mortgage Opportunity or generate 6.41% return on investment over 90 days.

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

Nuveen California Select  vs.  Nuveen Mortgage Opportunity

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Nuveen Mortgage Oppo

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Mortgage Opportunity are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Nuveen Mortgage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nuveen California and Nuveen Mortgage

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

The idea behind Nuveen California Select and Nuveen Mortgage Opportunity 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.