Correlation Between Pimco California and Nuveen California

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

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

Diversification Opportunities for Pimco California and Nuveen California

0.9

Correlation Coefficient

Pimco California  Nuveen California

Almost no diversification

The 3 months correlation between Pimco and Nuveen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Nuveen California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California and Pimco California 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 Pimco California Municipal are associated (or correlated) with Nuveen California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California has no effect on the direction of Pimco California i.e., Pimco California and Nuveen California go up and down completely randomly.

Pair Corralation between Pimco California and Nuveen California

Assuming the 90 days horizon Pimco California Municipal is expected to under-perform the Nuveen California. In addition to that, Pimco California is 2.1 times more volatile than Nuveen California Municipal. It trades about -0.02 of its total potential returns per unit of risk. Nuveen California Municipal is currently generating about 0.05 per unit of volatility. If you would invest  947.00  in Nuveen California Municipal on October 22, 2024 and sell it today you would earn a total of  52.00  from holding Nuveen California Municipal or generate 5.49% return on investment over 90 days.

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

Pimco California Municipal  vs.  Nuveen California Municipal

Pimco California Mun

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nuveen California

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pimco California and Nuveen California

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

The idea behind Pimco California Municipal and Nuveen California 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.