Correlation Between Nuveen Kansas and Royce Opportunity

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

By analyzing existing cross correlation between Nuveen Kansas Municipal and Royce Opportunity Fund, you can compare the effects of market volatilities on Nuveen Kansas and Royce Opportunity 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 Kansas with a short position of Royce Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Kansas and Royce Opportunity.

Diversification Opportunities for Nuveen Kansas and Royce Opportunity

-0.23

Correlation Coefficient

Nuveen Kansas  Royce Opportunity

Very good diversification

The 3 months correlation between Nuveen and ROYCE is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Kansas Municipal and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity and Nuveen Kansas 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 Kansas Municipal are associated (or correlated) with Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of Nuveen Kansas i.e., Nuveen Kansas and Royce Opportunity go up and down completely randomly.

Pair Corralation between Nuveen Kansas and Royce Opportunity

Assuming the 90 days horizon Nuveen Kansas Municipal is expected to under-perform the Royce Opportunity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nuveen Kansas Municipal is 5.73 times less risky than Royce Opportunity. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Royce Opportunity Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,546  in Royce Opportunity Fund on September 4, 2024 and sell it today you would earn a total of  220.00  from holding Royce Opportunity Fund or generate 14.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Nuveen Kansas Municipal  vs.  Royce Opportunity Fund

Nuveen Kansas Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Kansas Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nuveen Kansas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Royce Opportunity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Opportunity Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Royce Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuveen Kansas and Royce Opportunity

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

The idea behind Nuveen Kansas Municipal and Royce Opportunity Fund 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.