Correlation Between Vanguard Small-cap and Nuveen Kansas

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

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

Diversification Opportunities for Vanguard Small-cap and Nuveen Kansas

-0.21

Correlation Coefficient

Vanguard Small-cap  Nuveen Kansas

Very good diversification

The 3 months correlation between Vanguard and Nuveen is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Nuveen Kansas Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Kansas Municipal and Vanguard Small-cap 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 Vanguard Small Cap Value are associated (or correlated) with Nuveen Kansas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Kansas Municipal has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Nuveen Kansas go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Nuveen Kansas

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Nuveen Kansas. In addition to that, Vanguard Small-cap is 4.97 times more volatile than Nuveen Kansas Municipal. It trades about -0.09 of its total potential returns per unit of risk. Nuveen Kansas Municipal is currently generating about 0.08 per unit of volatility. If you would invest  986.00  in Nuveen Kansas Municipal on December 21, 2024 and sell it today you would earn a total of  9.00  from holding Nuveen Kansas Municipal or generate 0.91% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Nuveen Kansas Municipal

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

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

Nuveen Kansas Municipal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Kansas Municipal are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen Kansas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small-cap and Nuveen Kansas

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

The idea behind Vanguard Small Cap Value and Nuveen Kansas 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.