Correlation Between Short Real and Nuveen Small

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

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

Diversification Opportunities for Short Real and Nuveen Small

-0.01

Correlation Coefficient

Short Real  Nuveen Small

Good diversification

The 3 months correlation between Short and Nuveen is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Short Real Estate and Nuveen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Small Cap and Short 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 Short Real Estate are associated (or correlated) with Nuveen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Small Cap has no effect on the direction of Short Real i.e., Short Real and Nuveen Small go up and down completely randomly.

Pair Corralation between Short Real and Nuveen Small

Assuming the 90 days horizon Short Real Estate is expected to under-perform the Nuveen Small. In addition to that, Short Real is 1.09 times more volatile than Nuveen Small Cap. It trades about -0.13 of its total potential returns per unit of risk. Nuveen Small Cap is currently generating about 0.29 per unit of volatility. If you would invest  2,705  in Nuveen Small Cap on October 24, 2024 and sell it today you would earn a total of  156.00  from holding Nuveen Small Cap or generate 5.77% return on investment over 90 days.

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

Short Real Estate  vs.  Nuveen Small Cap

Short Real Estate

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Real Estate are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Real may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nuveen Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nuveen Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Short Real and Nuveen Small

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

The idea behind Short Real Estate and Nuveen Small Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.