Correlation Between Nuveen High and Nuveen Short

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

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

Diversification Opportunities for Nuveen High and Nuveen Short

0.94

Correlation Coefficient

Nuveen High  Nuveen Short

Almost no diversification

The 3 months correlation between Nuveen and Nuveen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen High Yield and Nuveen Short Duration High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Short Duration and Nuveen High 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 High Yield are associated (or correlated) with Nuveen Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Short Duration has no effect on the direction of Nuveen High i.e., Nuveen High and Nuveen Short go up and down completely randomly.

Pair Corralation between Nuveen High and Nuveen Short

Assuming the 90 days horizon Nuveen High Yield is expected to generate 1.79 times more return on investment than Nuveen Short. However, Nuveen High is 1.79 times more volatile than Nuveen Short Duration High. It trades about 0.0 of its potential returns per unit of risk. Nuveen Short Duration High is currently generating about -0.08 per unit of risk. If you would invest  1,516  in Nuveen High Yield on September 3, 2024 and sell it today you would lose (2.00) from holding Nuveen High Yield or give up 0.13% of portfolio value over 90 days.

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

Nuveen High Yield  vs.  Nuveen Short Duration High

Nuveen High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nuveen Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Short Duration High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Nuveen Short 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 High and Nuveen Short

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

The idea behind Nuveen High Yield and Nuveen Short Duration High 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.