Correlation Between American Funds and Nuveen Municipal
Can any of the company-specific risk be diversified away by investing in both American Funds and Nuveen Municipal 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 American Funds and Nuveen Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Income and Nuveen Municipal High, you can compare the effects of market volatilities on American Funds and Nuveen Municipal 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 American Funds with a short position of Nuveen Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Nuveen Municipal.
Diversification Opportunities for American Funds and Nuveen Municipal
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Nuveen is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Income and Nuveen Municipal High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Municipal High and American Funds 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 American Funds Income are associated (or correlated) with Nuveen Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Municipal High has no effect on the direction of American Funds i.e., American Funds and Nuveen Municipal go up and down completely randomly.
Pair Corralation between American Funds and Nuveen Municipal
Assuming the 90 days horizon American Funds Income is expected to generate 0.85 times more return on investment than Nuveen Municipal. However, American Funds Income is 1.17 times less risky than Nuveen Municipal. It trades about 0.17 of its potential returns per unit of risk. Nuveen Municipal High is currently generating about 0.1 per unit of risk. If you would invest 1,170 in American Funds Income on September 14, 2024 and sell it today you would earn a total of 196.00 from holding American Funds Income or generate 16.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Income vs. Nuveen Municipal High
Performance |
| Timeline |
| American Funds Income |
| Nuveen Municipal High |
American Funds and Nuveen Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Nuveen Municipal
The main advantage of trading using opposite American Funds and Nuveen Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Nuveen Municipal 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 Municipal will offset losses from the drop in Nuveen Municipal's long position.| American Funds vs. Nuveen Municipal High | American Funds vs. Metropolitan West High | American Funds vs. Alliancebernstein Global High | American Funds vs. Western Asset High |
| Nuveen Municipal vs. Vanguard Total Stock | Nuveen Municipal vs. Vanguard 500 Index | Nuveen Municipal vs. Vanguard Total Stock | Nuveen Municipal vs. Vanguard Total Stock |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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