Correlation Between Nuveen Dow and Western Asset

Can any of the company-specific risk be diversified away by investing in both Nuveen Dow and Western Asset 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 Nuveen Dow and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nuveen Dow 30Sm and Western Asset High, you can compare the effects of market volatilities on Nuveen Dow and Western Asset 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 Nuveen Dow with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Dow and Western Asset.

Diversification Opportunities for Nuveen Dow and Western Asset

0.62

Correlation Coefficient

Nuveen Dow  Western Asset

Poor diversification

The 3 months correlation between Nuveen and Western is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Dow 30Sm and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Nuveen Dow 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 Nuveen Dow 30Sm are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Nuveen Dow i.e., Nuveen Dow and Western Asset go up and down completely randomly.

Pair Corralation between Nuveen Dow and Western Asset

Given the investment horizon of 90 days Nuveen Dow 30Sm is expected to generate 0.78 times more return on investment than Western Asset. However, Nuveen Dow 30Sm is 1.29 times less risky than Western Asset. It trades about 0.51 of its potential returns per unit of risk. Western Asset High is currently generating about 0.13 per unit of risk. If you would invest  1,465  in Nuveen Dow 30Sm on September 5, 2024 and sell it today you would earn a total of  105.00  from holding Nuveen Dow 30Sm or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nuveen Dow 30Sm  vs.  Western Asset High

Nuveen Dow 30Sm

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Dow 30Sm are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Nuveen Dow may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Asset High

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nuveen Dow and Western Asset

The main advantage of trading using opposite Nuveen Dow and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Dow position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.

The idea behind Nuveen Dow 30Sm and Western Asset 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.