Correlation Between Vanguard and Nuveen ESG

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

By analyzing existing cross correlation between Vanguard SP 500 and Nuveen ESG Large Cap, you can compare the effects of market volatilities on Vanguard and Nuveen ESG 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 with a short position of Nuveen ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Nuveen ESG.

Diversification Opportunities for Vanguard and Nuveen ESG

0.99

Correlation Coefficient

Vanguard  Nuveen ESG

No risk reduction

The 3 months correlation between Vanguard and Nuveen is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Nuveen ESG Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Large and Vanguard 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 SP 500 are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG Large has no effect on the direction of Vanguard i.e., Vanguard and Nuveen ESG go up and down completely randomly.

Pair Corralation between Vanguard and Nuveen ESG

Considering the 90-day investment horizon Vanguard SP 500 is expected to under-perform the Nuveen ESG. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard SP 500 is 1.01 times less risky than Nuveen ESG. The etf trades about -0.05 of its potential returns per unit of risk. The Nuveen ESG Large Cap is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,567  in Nuveen ESG Large Cap on December 28, 2024 and sell it today you would lose (123.00) from holding Nuveen ESG Large Cap or give up 2.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Vanguard SP 500  vs.  Nuveen ESG Large Cap

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Nuveen ESG Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen ESG Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Nuveen ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard and Nuveen ESG

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

The idea behind Vanguard SP 500 and Nuveen ESG Large 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.