Correlation Between Eaton Vance and Nuveen California

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

By analyzing existing cross correlation between Eaton Vance National and Nuveen California Select, you can compare the effects of market volatilities on Eaton Vance and Nuveen California 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 Eaton Vance with a short position of Nuveen California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Nuveen California.

Diversification Opportunities for Eaton Vance and Nuveen California

0.74

Correlation Coefficient

Eaton Vance  Nuveen California

Poor diversification

The 3 months correlation between Eaton and Nuveen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance National and Nuveen California Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California Select and Eaton Vance 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 Eaton Vance National are associated (or correlated) with Nuveen California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California Select has no effect on the direction of Eaton Vance i.e., Eaton Vance and Nuveen California go up and down completely randomly.

Pair Corralation between Eaton Vance and Nuveen California

Considering the 90-day investment horizon Eaton Vance National is expected to under-perform the Nuveen California. But the stock apears to be less risky and, when comparing its historical volatility, Eaton Vance National is 1.2 times less risky than Nuveen California. The stock trades about -0.11 of its potential returns per unit of risk. The Nuveen California Select is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,349  in Nuveen California Select on August 30, 2024 and sell it today you would lose (8.00) from holding Nuveen California Select or give up 0.59% of portfolio value over 90 days.

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

Eaton Vance National  vs.  Nuveen California Select

Eaton Vance National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Nuveen California Select

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen California Select are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nuveen California is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eaton Vance and Nuveen California

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

The idea behind Eaton Vance National and Nuveen California Select 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.