Correlation Between California Bond and Nuveen Short-duration

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

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

Diversification Opportunities for California Bond and Nuveen Short-duration

0.7

Correlation Coefficient

California Bond  Nuveen Short-duration

Poor diversification

The 3 months correlation between California and NUVEEN is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund 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 California Bond 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 California Bond Fund are associated (or correlated) with Nuveen Short-duration. 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 California Bond i.e., California Bond and Nuveen Short-duration go up and down completely randomly.

Pair Corralation between California Bond and Nuveen Short-duration

Assuming the 90 days horizon California Bond is expected to generate 3.98 times less return on investment than Nuveen Short-duration. In addition to that, California Bond is 1.66 times more volatile than Nuveen Short Duration High. It trades about 0.02 of its total potential returns per unit of risk. Nuveen Short Duration High is currently generating about 0.12 per unit of volatility. If you would invest  950.00  in Nuveen Short Duration High on December 23, 2024 and sell it today you would earn a total of  12.00  from holding Nuveen Short Duration High or generate 1.26% return on investment over 90 days.

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

California Bond Fund  vs.  Nuveen Short Duration High

California Bond

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, California Bond 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Short Duration High are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen Short-duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with California Bond and Nuveen Short-duration

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

The idea behind California Bond Fund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.