Correlation Between Nuveen Preferred and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Nuveen Preferred and Metropolitan West 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 Preferred and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nuveen Preferred Securities and Metropolitan West High, you can compare the effects of market volatilities on Nuveen Preferred and Metropolitan West 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 Preferred with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Preferred and Metropolitan West.
Diversification Opportunities for Nuveen Preferred and Metropolitan West
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nuveen and Metropolitan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Preferred Securities and Metropolitan West High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West High and Nuveen Preferred 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 Preferred Securities are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West High has no effect on the direction of Nuveen Preferred i.e., Nuveen Preferred and Metropolitan West go up and down completely randomly.
Pair Corralation between Nuveen Preferred and Metropolitan West
Assuming the 90 days horizon Nuveen Preferred Securities is expected to generate 0.9 times more return on investment than Metropolitan West. However, Nuveen Preferred Securities is 1.11 times less risky than Metropolitan West. It trades about 0.28 of its potential returns per unit of risk. Metropolitan West High is currently generating about 0.2 per unit of risk. If you would invest 1,352 in Nuveen Preferred Securities on September 1, 2024 and sell it today you would earn a total of 214.00 from holding Nuveen Preferred Securities or generate 15.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Nuveen Preferred Securities vs. Metropolitan West High
Performance |
| Timeline |
| Nuveen Preferred Sec |
| Metropolitan West High |
Nuveen Preferred and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nuveen Preferred and Metropolitan West
The main advantage of trading using opposite Nuveen Preferred and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Preferred position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Nuveen Preferred vs. Nuveen Small Cap | Nuveen Preferred vs. Nuveen Real Estate | Nuveen Preferred vs. Nuveen Real Estate | Nuveen Preferred vs. Nuveen Preferred Securities |
| Metropolitan West vs. Federated Total Return | Metropolitan West vs. Global Bond Fund | Metropolitan West vs. Government Bond Fund | Metropolitan West vs. Aberdeen Global High |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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