Correlation Between Pimco Municipal and Nuveen Municipal

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

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

Diversification Opportunities for Pimco Municipal and Nuveen Municipal

0.61

Correlation Coefficient

Pimco Municipal  Nuveen Municipal

Poor diversification

The 3 months correlation between Pimco and Nuveen is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Municipal Income and Nuveen Municipal High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Municipal High and Pimco Municipal 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 Municipal Income are associated (or correlated) with Nuveen Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Municipal High has no effect on the direction of Pimco Municipal i.e., Pimco Municipal and Nuveen Municipal go up and down completely randomly.

Pair Corralation between Pimco Municipal and Nuveen Municipal

Considering the 90-day investment horizon Pimco Municipal Income is expected to under-perform the Nuveen Municipal. In addition to that, Pimco Municipal is 1.47 times more volatile than Nuveen Municipal High. It trades about -0.06 of its total potential returns per unit of risk. Nuveen Municipal High is currently generating about -0.01 per unit of volatility. If you would invest  1,162  in Nuveen Municipal High on September 13, 2024 and sell it today you would lose (5.00) from holding Nuveen Municipal High or give up 0.43% of portfolio value over 90 days.

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

Pimco Municipal Income  vs.  Nuveen Municipal High

Pimco Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Municipal Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Pimco Municipal is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Nuveen Municipal High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Municipal High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Nuveen Municipal 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 Municipal and Nuveen Municipal

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

The idea behind Pimco Municipal Income and Nuveen Municipal High 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.