Correlation Between Nuveen All-american and Pax Small
Can any of the company-specific risk be diversified away by investing in both Nuveen All-american and Pax Small 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 Pax Small 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 Pax Small Cap, you can compare the effects of market volatilities on Nuveen All-american and Pax Small 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 Pax Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen All-american and Pax Small.
Diversification Opportunities for Nuveen All-american and Pax Small
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nuveen and Pax is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen All American Municipal and Pax Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Small Cap 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 Pax Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Small Cap has no effect on the direction of Nuveen All-american i.e., Nuveen All-american and Pax Small go up and down completely randomly.
Pair Corralation between Nuveen All-american and Pax Small
Assuming the 90 days horizon Nuveen All-american is expected to generate 8.33 times less return on investment than Pax Small. But when comparing it to its historical volatility, Nuveen All American Municipal is 4.36 times less risky than Pax Small. It trades about 0.15 of its potential returns per unit of risk. Pax Small Cap is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,793 in Pax Small Cap on August 29, 2024 and sell it today you would earn a total of 159.00 from holding Pax Small Cap or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Nuveen All American Municipal vs. Pax Small Cap
Performance |
| Timeline |
| Nuveen All American |
| Pax Small Cap |
Nuveen All-american and Pax Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nuveen All-american and Pax Small
The main advantage of trading using opposite Nuveen All-american and Pax Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen All-american position performs unexpectedly, Pax Small 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 Pax Small will offset losses from the drop in Pax Small's long position.The idea behind Nuveen All American Municipal and Pax Small Cap 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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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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