Correlation Between Nuveen Municipal and Copeland Risk

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

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

Diversification Opportunities for Nuveen Municipal and Copeland Risk

0.11

Correlation Coefficient

Nuveen Municipal  Copeland Risk

Average diversification

The 3 months correlation between Nuveen and Copeland is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal High and Copeland Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copeland Risk Managed and Nuveen 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 Nuveen Municipal High are associated (or correlated) with Copeland Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copeland Risk Managed has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Copeland Risk go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Copeland Risk

Assuming the 90 days horizon Nuveen Municipal High is expected to generate 0.44 times more return on investment than Copeland Risk. However, Nuveen Municipal High is 2.29 times less risky than Copeland Risk. It trades about -0.08 of its potential returns per unit of risk. Copeland Risk Managed is currently generating about -0.08 per unit of risk. If you would invest  1,099  in Nuveen Municipal High on December 27, 2024 and sell it today you would lose (22.00) from holding Nuveen Municipal High or give up 2.0% of portfolio value over 90 days.

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

Nuveen Municipal High  vs.  Copeland Risk Managed

Nuveen Municipal High

Risk-Adjusted Performance

Very Weak

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

Copeland Risk Managed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nuveen Municipal and Copeland Risk

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

The idea behind Nuveen Municipal High and Copeland Risk Managed 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.