Correlation Between Nuveen New and Redwood Managed

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

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

Diversification Opportunities for Nuveen New and Redwood Managed

0.77

Correlation Coefficient

Nuveen New  Redwood Managed

Poor diversification

The 3 months correlation between Nuveen and Redwood is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen New Jersey and Redwood Managed Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Managed Municipal and Nuveen New 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 New Jersey are associated (or correlated) with Redwood Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Managed Municipal has no effect on the direction of Nuveen New i.e., Nuveen New and Redwood Managed go up and down completely randomly.

Pair Corralation between Nuveen New and Redwood Managed

Assuming the 90 days horizon Nuveen New Jersey is expected to under-perform the Redwood Managed. In addition to that, Nuveen New is 4.22 times more volatile than Redwood Managed Municipal. It trades about -0.02 of its total potential returns per unit of risk. Redwood Managed Municipal is currently generating about -0.01 per unit of volatility. If you would invest  1,495  in Redwood Managed Municipal on August 30, 2024 and sell it today you would lose (1.00) from holding Redwood Managed Municipal or give up 0.07% of portfolio value over 90 days.

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

Nuveen New Jersey  vs.  Redwood Managed Municipal

Nuveen New Jersey

Risk-Adjusted Performance

0 of 100

Very Weak

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

Redwood Managed Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redwood Managed Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Redwood Managed 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 New and Redwood Managed

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

The idea behind Nuveen New Jersey and Redwood Managed 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.