Correlation Between Transamerica Large and Nuveen Minnesota

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

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

Diversification Opportunities for Transamerica Large and Nuveen Minnesota

0.54

Correlation Coefficient

Transamerica Large  Nuveen Minnesota

Very weak diversification

The 3 months correlation between Transamerica and Nuveen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Large Core and Nuveen Minnesota Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Minnesota Mun and Transamerica Large 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 Transamerica Large Core are associated (or correlated) with Nuveen Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Minnesota Mun has no effect on the direction of Transamerica Large i.e., Transamerica Large and Nuveen Minnesota go up and down completely randomly.

Pair Corralation between Transamerica Large and Nuveen Minnesota

Assuming the 90 days horizon Transamerica Large Core is expected to under-perform the Nuveen Minnesota. In addition to that, Transamerica Large is 10.83 times more volatile than Nuveen Minnesota Municipal. It trades about -0.15 of its total potential returns per unit of risk. Nuveen Minnesota Municipal is currently generating about -0.03 per unit of volatility. If you would invest  1,084  in Nuveen Minnesota Municipal on December 2, 2024 and sell it today you would lose (4.00) from holding Nuveen Minnesota Municipal or give up 0.37% of portfolio value over 90 days.

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

Transamerica Large Core  vs.  Nuveen Minnesota Municipal

Transamerica Large Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Large Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Nuveen Minnesota Mun

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Transamerica Large and Nuveen Minnesota

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

The idea behind Transamerica Large Core and Nuveen Minnesota Municipal 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.