Correlation Between California Bond and Nuveen Mid

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Can any of the company-specific risk be diversified away by investing in both California Bond and Nuveen Mid 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 California Bond and Nuveen Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Nuveen Mid Cap, you can compare the effects of market volatilities on California Bond and Nuveen Mid 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 California Bond with a short position of Nuveen Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Nuveen Mid.

Diversification Opportunities for California Bond and Nuveen Mid

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between California and Nuveen is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Nuveen Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Mid Cap and California Bond 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 California Bond Fund are associated (or correlated) with Nuveen Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Mid Cap has no effect on the direction of California Bond i.e., California Bond and Nuveen Mid go up and down completely randomly.

Pair Corralation between California Bond and Nuveen Mid

Assuming the 90 days horizon California Bond is expected to generate 3.16 times less return on investment than Nuveen Mid. But when comparing it to its historical volatility, California Bond Fund is 3.39 times less risky than Nuveen Mid. It trades about 0.07 of its potential returns per unit of risk. Nuveen Mid Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,857  in Nuveen Mid Cap on September 12, 2024 and sell it today you would earn a total of  1,119  from holding Nuveen Mid Cap or generate 23.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

California Bond Fund  vs.  Nuveen Mid Cap

 Performance 
       Timeline  
California Bond 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, California Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Nuveen Mid Cap 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Mid Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Nuveen Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

California Bond and Nuveen Mid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with California Bond and Nuveen Mid

The main advantage of trading using opposite California Bond and Nuveen Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Nuveen Mid 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 Mid will offset losses from the drop in Nuveen Mid's long position.
The idea behind California Bond Fund and Nuveen Mid Cap 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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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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