Correlation Between Aig Government and Nuveen Short

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

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

Diversification Opportunities for Aig Government and Nuveen Short

0.96

Correlation Coefficient

Aig Government  Nuveen Short

Almost no diversification

The 3 months correlation between Aig and Nuveen is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Aig Government Money and Nuveen Short Duration High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Short Duration and Aig Government 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 Aig Government Money are associated (or correlated) with Nuveen Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Short Duration has no effect on the direction of Aig Government i.e., Aig Government and Nuveen Short go up and down completely randomly.

Pair Corralation between Aig Government and Nuveen Short

Assuming the 90 days horizon Aig Government is expected to generate 1.85 times less return on investment than Nuveen Short. In addition to that, Aig Government is 1.03 times more volatile than Nuveen Short Duration High. It trades about 0.07 of its total potential returns per unit of risk. Nuveen Short Duration High is currently generating about 0.13 per unit of volatility. If you would invest  887.00  in Nuveen Short Duration High on December 2, 2024 and sell it today you would earn a total of  84.00  from holding Nuveen Short Duration High or generate 9.47% return on investment over 90 days.

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

Aig Government Money  vs.  Nuveen Short Duration High

Aig Government Money

Risk-Adjusted Performance

Very Weak

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

Nuveen Short Duration

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Short Duration High are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Nuveen Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aig Government and Nuveen Short

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

The idea behind Aig Government Money and Nuveen Short Duration 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.