Correlation Between Nuveen All-american and Morningstar Defensive

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Can any of the company-specific risk be diversified away by investing in both Nuveen All-american and Morningstar Defensive 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 All-american and Morningstar Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nuveen All American Municipal and Morningstar Defensive Bond, you can compare the effects of market volatilities on Nuveen All-american and Morningstar Defensive 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 All-american with a short position of Morningstar Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen All-american and Morningstar Defensive.

Diversification Opportunities for Nuveen All-american and Morningstar Defensive

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between NUVEEN and Morningstar is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen All American Municipal and Morningstar Defensive Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Defensive and Nuveen All-american 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 All American Municipal are associated (or correlated) with Morningstar Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Defensive has no effect on the direction of Nuveen All-american i.e., Nuveen All-american and Morningstar Defensive go up and down completely randomly.

Pair Corralation between Nuveen All-american and Morningstar Defensive

Assuming the 90 days horizon Nuveen All American Municipal is expected to generate 2.35 times more return on investment than Morningstar Defensive. However, Nuveen All-american is 2.35 times more volatile than Morningstar Defensive Bond. It trades about 0.14 of its potential returns per unit of risk. Morningstar Defensive Bond is currently generating about 0.11 per unit of risk. If you would invest  1,012  in Nuveen All American Municipal on August 28, 2024 and sell it today you would earn a total of  10.00  from holding Nuveen All American Municipal or generate 0.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nuveen All American Municipal  vs.  Morningstar Defensive Bond

 Performance 
       Timeline  
Nuveen All American 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen All American Municipal are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Nuveen All-american is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Morningstar Defensive 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Defensive Bond are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Morningstar Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuveen All-american and Morningstar Defensive Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nuveen All-american and Morningstar Defensive

The main advantage of trading using opposite Nuveen All-american and Morningstar Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen All-american position performs unexpectedly, Morningstar Defensive 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 Morningstar Defensive will offset losses from the drop in Morningstar Defensive's long position.
The idea behind Nuveen All American Municipal and Morningstar Defensive Bond 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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