Correlation Between Dow Jones and Nuveen Preferred
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Nuveen Preferred 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 Dow Jones and Nuveen Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Nuveen Preferred Securities, you can compare the effects of market volatilities on Dow Jones and Nuveen Preferred 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 Dow Jones with a short position of Nuveen Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Nuveen Preferred.
Diversification Opportunities for Dow Jones and Nuveen Preferred
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Nuveen is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Nuveen Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Preferred Sec and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Nuveen Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Preferred Sec has no effect on the direction of Dow Jones i.e., Dow Jones and Nuveen Preferred go up and down completely randomly.
Pair Corralation between Dow Jones and Nuveen Preferred
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.81 times more return on investment than Nuveen Preferred. However, Dow Jones is 1.81 times more volatile than Nuveen Preferred Securities. It trades about 0.08 of its potential returns per unit of risk. Nuveen Preferred Securities is currently generating about 0.06 per unit of risk. If you would invest 3,279,840 in Dow Jones Industrial on November 27, 2024 and sell it today you would earn a total of 1,066,281 from holding Dow Jones Industrial or generate 32.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Nuveen Preferred Securities
Performance |
| Timeline |
Dow Jones and Nuveen Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Nuveen Preferred Securities
Pair trading matchups for Nuveen Preferred
Pair Trading with Dow Jones and Nuveen Preferred
The main advantage of trading using opposite Dow Jones and Nuveen Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Nuveen Preferred 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 Preferred will offset losses from the drop in Nuveen Preferred's long position.The idea behind Dow Jones Industrial and Nuveen Preferred Securities 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.| Nuveen Preferred vs. Ab Bond Inflation | Nuveen Preferred vs. Inflation Linked Fixed Income | Nuveen Preferred vs. Ab Bond Inflation | Nuveen Preferred vs. Credit Suisse Multialternative |
Check out your portfolio center.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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