Correlation Between Dreyfus Municipal and Nuveen Strategic
Can any of the company-specific risk be diversified away by investing in both Dreyfus Municipal and Nuveen Strategic 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 Dreyfus Municipal and Nuveen Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Municipal Bond and Nuveen Strategic Municipal, you can compare the effects of market volatilities on Dreyfus Municipal and Nuveen Strategic 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 Dreyfus Municipal with a short position of Nuveen Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Municipal and Nuveen Strategic.
Diversification Opportunities for Dreyfus Municipal and Nuveen Strategic
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dreyfus and Nuveen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Municipal Bond and Nuveen Strategic Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Strategic Mun and Dreyfus Municipal 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 Dreyfus Municipal Bond are associated (or correlated) with Nuveen Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Strategic Mun has no effect on the direction of Dreyfus Municipal i.e., Dreyfus Municipal and Nuveen Strategic go up and down completely randomly.
Pair Corralation between Dreyfus Municipal and Nuveen Strategic
Assuming the 90 days horizon Dreyfus Municipal Bond is expected to under-perform the Nuveen Strategic. In addition to that, Dreyfus Municipal is 1.75 times more volatile than Nuveen Strategic Municipal. It trades about -0.01 of its total potential returns per unit of risk. Nuveen Strategic Municipal is currently generating about 0.07 per unit of volatility. If you would invest 919.00 in Nuveen Strategic Municipal on October 24, 2024 and sell it today you would earn a total of 77.00 from holding Nuveen Strategic Municipal or generate 8.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dreyfus Municipal Bond vs. Nuveen Strategic Municipal
Performance |
Timeline |
Dreyfus Municipal Bond |
Nuveen Strategic Mun |
Dreyfus Municipal and Nuveen Strategic Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dreyfus Municipal and Nuveen Strategic
The main advantage of trading using opposite Dreyfus Municipal and Nuveen Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Municipal position performs unexpectedly, Nuveen Strategic 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 Strategic will offset losses from the drop in Nuveen Strategic's long position.Dreyfus Municipal vs. Siit High Yield | Dreyfus Municipal vs. Needham Aggressive Growth | Dreyfus Municipal vs. Dunham High Yield | Dreyfus Municipal vs. Catalystsmh High Income |
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Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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