Correlation Between Nuveen Municipal and Nuveen California

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

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

Diversification Opportunities for Nuveen Municipal and Nuveen California

0.77

Correlation Coefficient

Nuveen Municipal  Nuveen California

Poor diversification

The 3 months correlation between Nuveen and Nuveen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal Credit and Nuveen California Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California Select 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 Credit 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 Select has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Nuveen California go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Nuveen California

Given the investment horizon of 90 days Nuveen Municipal Credit is expected to generate 0.52 times more return on investment than Nuveen California. However, Nuveen Municipal Credit is 1.91 times less risky than Nuveen California. It trades about 0.25 of its potential returns per unit of risk. Nuveen California Select is currently generating about 0.05 per unit of risk. If you would invest  1,015  in Nuveen Municipal Credit on February 28, 2024 and sell it today you would earn a total of  31.00  from holding Nuveen Municipal Credit or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Nuveen Municipal Credit  vs.  Nuveen California Select

Nuveen Municipal Credit

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Municipal Credit are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy fundamental indicators, Nuveen Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nuveen California Select

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen California Select are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nuveen California is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nuveen Municipal and Nuveen California

The main advantage of trading using opposite Nuveen Municipal and Nuveen California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Municipal 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 Nuveen Municipal Credit and Nuveen California Select 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.