Correlation Between Pimco California and Nuveen California

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

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

Diversification Opportunities for Pimco California and Nuveen California

0.71

Correlation Coefficient

Pimco California  Nuveen California

Poor diversification

The 3 months correlation between Pimco and Nuveen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Nuveen California Amt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California Amt and Pimco 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 Pimco California Municipal are associated (or correlated) with Nuveen California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California Amt has no effect on the direction of Pimco California i.e., Pimco California and Nuveen California go up and down completely randomly.

Pair Corralation between Pimco California and Nuveen California

Considering the 90-day investment horizon Pimco California is expected to generate 4.52 times less return on investment than Nuveen California. But when comparing it to its historical volatility, Pimco California Municipal is 1.13 times less risky than Nuveen California. It trades about 0.02 of its potential returns per unit of risk. Nuveen California Amt is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,234  in Nuveen California Amt on December 27, 2024 and sell it today you would earn a total of  36.00  from holding Nuveen California Amt or generate 2.92% return on investment over 90 days.

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

Pimco California Municipal  vs.  Nuveen California Amt

Pimco California Mun

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco California Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent fundamental indicators, Pimco California is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nuveen California Amt

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen California Amt are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Nuveen California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pimco California and Nuveen California

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

The idea behind Pimco California Municipal and Nuveen California Amt 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.