Correlation Between Overlay Shares and Nuveen Enhanced

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

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

Diversification Opportunities for Overlay Shares and Nuveen Enhanced

0.34

Correlation Coefficient

Overlay Shares  Nuveen Enhanced

Weak diversification

The 3 months correlation between Overlay and Nuveen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Core and Nuveen Enhanced Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Enhanced Yield and Overlay Shares 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 Overlay Shares Core are associated (or correlated) with Nuveen Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Enhanced Yield has no effect on the direction of Overlay Shares i.e., Overlay Shares and Nuveen Enhanced go up and down completely randomly.

Pair Corralation between Overlay Shares and Nuveen Enhanced

Considering the 90-day investment horizon Overlay Shares is expected to generate 2.82 times less return on investment than Nuveen Enhanced. In addition to that, Overlay Shares is 3.29 times more volatile than Nuveen Enhanced Yield. It trades about 0.03 of its total potential returns per unit of risk. Nuveen Enhanced Yield is currently generating about 0.3 per unit of volatility. If you would invest  2,288  in Nuveen Enhanced Yield on October 26, 2024 and sell it today you would earn a total of  17.00  from holding Nuveen Enhanced Yield or generate 0.74% return on investment over 90 days.

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

Overlay Shares Core  vs.  Nuveen Enhanced Yield

Overlay Shares Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overlay Shares Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Overlay Shares is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Nuveen Enhanced Yield

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Enhanced Yield are ranked lower than 5 (%) 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.

Pair Trading with Overlay Shares and Nuveen Enhanced

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

The idea behind Overlay Shares Core and Nuveen Enhanced Yield 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.