Correlation Between Tekla Life and Nuveen California

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

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

Diversification Opportunities for Tekla Life and Nuveen California

0.7

Correlation Coefficient

Tekla Life  Nuveen California

Poor diversification

The 3 months correlation between Tekla and Nuveen is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Life Sciences and Nuveen California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California and Tekla Life 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 Tekla Life Sciences 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 has no effect on the direction of Tekla Life i.e., Tekla Life and Nuveen California go up and down completely randomly.

Pair Corralation between Tekla Life and Nuveen California

Considering the 90-day investment horizon Tekla Life Sciences is expected to generate 2.05 times more return on investment than Nuveen California. However, Tekla Life is 2.05 times more volatile than Nuveen California Municipal. It trades about 0.1 of its potential returns per unit of risk. Nuveen California Municipal is currently generating about 0.03 per unit of risk. If you would invest  1,234  in Tekla Life Sciences on September 3, 2024 and sell it today you would earn a total of  192.00  from holding Tekla Life Sciences or generate 15.56% return on investment over 90 days.

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

Tekla Life Sciences  vs.  Nuveen California Municipal

Tekla Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Tekla Life is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nuveen California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen California Municipal has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, Nuveen California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tekla Life and Nuveen California

The main advantage of trading using opposite Tekla Life and Nuveen California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tekla Life 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 Tekla Life Sciences and Nuveen California Municipal 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.