Correlation Between Nuveen All-american and California Bond
Can any of the company-specific risk be diversified away by investing in both Nuveen All-american and California Bond 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 California Bond 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 California Bond Fund, you can compare the effects of market volatilities on Nuveen All-american and California Bond 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 California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen All-american and California Bond.
Diversification Opportunities for Nuveen All-american and California Bond
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NUVEEN and California is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen All American Municipal and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond 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 California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Nuveen All-american i.e., Nuveen All-american and California Bond go up and down completely randomly.
Pair Corralation between Nuveen All-american and California Bond
Assuming the 90 days horizon Nuveen All American Municipal is expected to generate 1.0 times more return on investment than California Bond. However, Nuveen All American Municipal is 1.0 times less risky than California Bond. It trades about 0.11 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.1 per unit of risk. If you would invest 962.00 in Nuveen All American Municipal on August 24, 2024 and sell it today you would earn a total of 57.00 from holding Nuveen All American Municipal or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nuveen All American Municipal vs. California Bond Fund
Performance |
| Timeline |
| Nuveen All American |
| California Bond |
Nuveen All-american and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nuveen All-american and California Bond
The main advantage of trading using opposite Nuveen All-american and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen All-american position performs unexpectedly, California Bond 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 California Bond will offset losses from the drop in California Bond's long position.The idea behind Nuveen All American Municipal and California Bond Fund 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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