Correlation Between Ford and Nuveen Quality
Can any of the company-specific risk be diversified away by investing in both Ford and Nuveen Quality 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 Ford and Nuveen Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Nuveen Quality Municipal, you can compare the effects of market volatilities on Ford and Nuveen Quality 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 Ford with a short position of Nuveen Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Nuveen Quality.
Diversification Opportunities for Ford and Nuveen Quality
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Nuveen is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nuveen Quality Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Quality Municipal and Ford 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 Ford Motor are associated (or correlated) with Nuveen Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Quality Municipal has no effect on the direction of Ford i.e., Ford and Nuveen Quality go up and down completely randomly.
Pair Corralation between Ford and Nuveen Quality
Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.87 times more return on investment than Nuveen Quality. However, Ford is 3.87 times more volatile than Nuveen Quality Municipal. It trades about 0.23 of its potential returns per unit of risk. Nuveen Quality Municipal is currently generating about 0.16 per unit of risk. If you would invest 1,015 in Ford Motor on September 1, 2024 and sell it today you would earn a total of 98.00 from holding Ford Motor or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. Nuveen Quality Municipal
Performance |
| Timeline |
| Ford Motor |
| Nuveen Quality Municipal |
Ford and Nuveen Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Nuveen Quality
The main advantage of trading using opposite Ford and Nuveen Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Nuveen Quality 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 Quality will offset losses from the drop in Nuveen Quality's long position.The idea behind Ford Motor and Nuveen Quality 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.| Nuveen Quality vs. Vanguard Total Stock | Nuveen Quality vs. Vanguard 500 Index | Nuveen Quality vs. Vanguard Total Stock | Nuveen Quality vs. Vanguard Total Stock |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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