Correlation Between Prudential Muni and Nuveen High
Can any of the company-specific risk be diversified away by investing in both Prudential Muni and Nuveen High 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 Prudential Muni and Nuveen High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Muni High and Nuveen High Yield, you can compare the effects of market volatilities on Prudential Muni and Nuveen High 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 Prudential Muni with a short position of Nuveen High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Muni and Nuveen High.
Diversification Opportunities for Prudential Muni and Nuveen High
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prudential and Nuveen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Muni High and Nuveen High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen High Yield and Prudential Muni 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 Prudential Muni High are associated (or correlated) with Nuveen High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen High Yield has no effect on the direction of Prudential Muni i.e., Prudential Muni and Nuveen High go up and down completely randomly.
Pair Corralation between Prudential Muni and Nuveen High
Assuming the 90 days horizon Prudential Muni is expected to generate 1.66 times less return on investment than Nuveen High. But when comparing it to its historical volatility, Prudential Muni High is 1.34 times less risky than Nuveen High. It trades about 0.2 of its potential returns per unit of risk. Nuveen High Yield is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,477 in Nuveen High Yield on September 4, 2024 and sell it today you would earn a total of 38.00 from holding Nuveen High Yield or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Prudential Muni High vs. Nuveen High Yield
Performance |
| Timeline |
| Prudential Muni High |
| Nuveen High Yield |
Prudential Muni and Nuveen High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Muni and Nuveen High
The main advantage of trading using opposite Prudential Muni and Nuveen High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Muni position performs unexpectedly, Nuveen High 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 High will offset losses from the drop in Nuveen High's long position.The idea behind Prudential Muni High and Nuveen High Yield 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 High vs. Oppenheimer Roc High | Nuveen High vs. Nuveen High Yield | Nuveen High vs. Pimco Income Fund |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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