Correlation Between Short-term Government and Nuveen Preferred
Can any of the company-specific risk be diversified away by investing in both Short-term Government and Nuveen Preferred 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 Short-term Government and Nuveen Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Nuveen Preferred Securities, you can compare the effects of market volatilities on Short-term Government and Nuveen Preferred 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 Short-term Government with a short position of Nuveen Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Nuveen Preferred.
Diversification Opportunities for Short-term Government and Nuveen Preferred
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Short-term and Nuveen is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Nuveen Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Preferred Sec and Short-term Government 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 Short Term Government Fund are associated (or correlated) with Nuveen Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Preferred Sec has no effect on the direction of Short-term Government i.e., Short-term Government and Nuveen Preferred go up and down completely randomly.
Pair Corralation between Short-term Government and Nuveen Preferred
Assuming the 90 days horizon Short-term Government is expected to generate 3.83 times less return on investment than Nuveen Preferred. But when comparing it to its historical volatility, Short Term Government Fund is 1.32 times less risky than Nuveen Preferred. It trades about 0.07 of its potential returns per unit of risk. Nuveen Preferred Securities is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,441 in Nuveen Preferred Securities on August 25, 2024 and sell it today you would earn a total of 118.00 from holding Nuveen Preferred Securities or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Government Fund vs. Nuveen Preferred Securities
Performance |
| Timeline |
| Short Term Government |
| Nuveen Preferred Sec |
Short-term Government and Nuveen Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Nuveen Preferred
The main advantage of trading using opposite Short-term Government and Nuveen Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government position performs unexpectedly, Nuveen Preferred 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 Preferred will offset losses from the drop in Nuveen Preferred's long position.The idea behind Short Term Government Fund and Nuveen Preferred Securities 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 Preferred vs. Fidelity Series Government | Nuveen Preferred vs. Franklin Adjustable Government | Nuveen Preferred vs. Short Term Government Fund | Nuveen Preferred vs. Government Securities 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |