Correlation Between Exxon and Nuveen Municipal
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and Nuveen Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Nuveen Municipal High, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of Nuveen Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Nuveen Municipal.
Diversification Opportunities for Exxon and Nuveen Municipal
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exxon and Nuveen is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Nuveen Municipal go up and down completely randomly.
Pair Corralation between Exxon and Nuveen Municipal
Considering the 90-day investment horizon Exxon is expected to generate 7.2 times less return on investment than Nuveen Municipal. In addition to that, Exxon is 1.53 times more volatile than Nuveen Municipal High. It trades about 0.01 of its total potential returns per unit of risk. Nuveen Municipal High is currently generating about 0.15 per unit of volatility. If you would invest 1,123 in Nuveen Municipal High on September 4, 2024 and sell it today you would earn a total of 20.00 from holding Nuveen Municipal High or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Nuveen Municipal High
Performance |
| Timeline |
| Exxon Mobil Corp |
| Nuveen Municipal High |
Exxon and Nuveen Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Nuveen Municipal
The main advantage of trading using opposite Exxon and Nuveen Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.The idea behind Exxon Mobil Corp and Nuveen Municipal High 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 Municipal vs. T Rowe Price | Nuveen Municipal vs. Artisan High Income | Nuveen Municipal vs. Ppm High Yield | Nuveen Municipal vs. Lord Abbett High |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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