Correlation Between Nuveen Municipal and Ultrashort Small-cap

Can any of the company-specific risk be diversified away by investing in both Nuveen Municipal and Ultrashort Small-cap 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 Ultrashort Small-cap 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 Ultrashort Small Cap Profund, you can compare the effects of market volatilities on Nuveen Municipal and Ultrashort Small-cap 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 Ultrashort Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Municipal and Ultrashort Small-cap.

Diversification Opportunities for Nuveen Municipal and Ultrashort Small-cap

-0.04

Correlation Coefficient

Nuveen Municipal  Ultrashort Small-cap

Good diversification

The 3 months correlation between Nuveen and Ultrashort is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal High and Ultrashort Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Small Cap 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 Ultrashort Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Small Cap has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Ultrashort Small-cap go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Ultrashort Small-cap

Assuming the 90 days horizon Nuveen Municipal High is expected to generate 0.19 times more return on investment than Ultrashort Small-cap. However, Nuveen Municipal High is 5.2 times less risky than Ultrashort Small-cap. It trades about -0.01 of its potential returns per unit of risk. Ultrashort Small Cap Profund is currently generating about -0.02 per unit of risk. If you would invest  1,142  in Nuveen Municipal High on October 4, 2024 and sell it today you would lose (37.00) from holding Nuveen Municipal High or give up 3.24% of portfolio value over 90 days.

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

Nuveen Municipal High  vs.  Ultrashort Small Cap Profund

Nuveen Municipal High

Risk-Adjusted Performance

0 of 100

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.

Ultrashort Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Small Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ultrashort Small-cap 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 Ultrashort Small-cap

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

The idea behind Nuveen Municipal High and Ultrashort Small Cap Profund 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 Transaction History module to view history of all your transactions and understand their impact on performance.