Correlation Between Deutsche Real and Nuveen Preferred

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

By analyzing existing cross correlation between Deutsche Real Estate and Nuveen Preferred Securities, you can compare the effects of market volatilities on Deutsche Real and Nuveen Preferred 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 Deutsche Real with a short position of Nuveen Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Real and Nuveen Preferred.

Diversification Opportunities for Deutsche Real and Nuveen Preferred

0.3

Correlation Coefficient

Deutsche Real  Nuveen Preferred

Weak diversification

The 3 months correlation between Deutsche and Nuveen is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Real Estate and Nuveen Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Preferred Sec and Deutsche Real 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 Deutsche Real Estate are associated (or correlated) with Nuveen Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Preferred Sec has no effect on the direction of Deutsche Real i.e., Deutsche Real and Nuveen Preferred go up and down completely randomly.

Pair Corralation between Deutsche Real and Nuveen Preferred

Assuming the 90 days horizon Deutsche Real Estate is expected to generate 2.81 times more return on investment than Nuveen Preferred. However, Deutsche Real is 2.81 times more volatile than Nuveen Preferred Securities. It trades about 0.05 of its potential returns per unit of risk. Nuveen Preferred Securities is currently generating about 0.07 per unit of risk. If you would invest  1,917  in Deutsche Real Estate on September 4, 2024 and sell it today you would earn a total of  473.00  from holding Deutsche Real Estate or generate 24.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Deutsche Real Estate  vs.  Nuveen Preferred Securities

Deutsche Real Estate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Real Estate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuveen Preferred Sec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Preferred Securities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Real and Nuveen Preferred

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

The idea behind Deutsche Real Estate and Nuveen Preferred Securities 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.