Correlation Between Cref Inflation-linked and Nuveen Municipal

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

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

Diversification Opportunities for Cref Inflation-linked and Nuveen Municipal

0.82

Correlation Coefficient

Cref Inflation-linked  Nuveen Municipal

Very poor diversification

The 3 months correlation between Cref and Nuveen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond 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 Cref Inflation-linked 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 Cref Inflation Linked Bond 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 Cref Inflation-linked i.e., Cref Inflation-linked and Nuveen Municipal go up and down completely randomly.

Pair Corralation between Cref Inflation-linked and Nuveen Municipal

Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to under-perform the Nuveen Municipal. But the fund apears to be less risky and, when comparing its historical volatility, Cref Inflation Linked Bond is 3.89 times less risky than Nuveen Municipal. The fund trades about 0.0 of its potential returns per unit of risk. The Nuveen Municipal High is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,091  in Nuveen Municipal High on October 24, 2024 and sell it today you would earn a total of  14.00  from holding Nuveen Municipal High or generate 1.28% return on investment over 90 days.

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

Cref Inflation Linked Bond  vs.  Nuveen Municipal High

Cref Inflation Linked

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cref Inflation Linked Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cref Inflation-linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuveen Municipal High

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Municipal High are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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 Cref Inflation-linked and Nuveen Municipal

The main advantage of trading using opposite Cref Inflation-linked and Nuveen Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation-linked 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 Cref Inflation Linked Bond 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.