Correlation Between Western Asset and Nuveen Dow
Can any of the company-specific risk be diversified away by investing in both Western Asset and Nuveen Dow 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 Western Asset and Nuveen Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Nuveen Dow 30, you can compare the effects of market volatilities on Western Asset and Nuveen Dow 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 Western Asset with a short position of Nuveen Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Nuveen Dow.
Diversification Opportunities for Western Asset and Nuveen Dow
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Nuveen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Nuveen Dow 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Dow 30 and Western Asset 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 Western Asset High are associated (or correlated) with Nuveen Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Dow 30 has no effect on the direction of Western Asset i.e., Western Asset and Nuveen Dow go up and down completely randomly.
Pair Corralation between Western Asset and Nuveen Dow
Assuming the 90 days horizon Western Asset is expected to generate 1.54 times less return on investment than Nuveen Dow. But when comparing it to its historical volatility, Western Asset High is 4.26 times less risky than Nuveen Dow. It trades about 0.18 of its potential returns per unit of risk. Nuveen Dow 30 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,736 in Nuveen Dow 30 on September 14, 2024 and sell it today you would earn a total of 11.00 from holding Nuveen Dow 30 or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Nuveen Dow 30
Performance |
| Timeline |
| Western Asset High |
| Nuveen Dow 30 |
Western Asset and Nuveen Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Nuveen Dow
The main advantage of trading using opposite Western Asset and Nuveen Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Nuveen Dow 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 Dow will offset losses from the drop in Nuveen Dow's long position.| Western Asset vs. Jpmorgan Smartretirement 2035 | Western Asset vs. Columbia Moderate Growth | Western Asset vs. Qs Moderate Growth | Western Asset vs. Sierra E Retirement |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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