Correlation Between Nuveen Municipal and Tekla World

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

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

Diversification Opportunities for Nuveen Municipal and Tekla World

0.78

Correlation Coefficient

Nuveen Municipal  Tekla World

Poor diversification

The 3 months correlation between Nuveen and Tekla is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Municipal Credit and Tekla World Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla World Healthcare and Nuveen Municipal 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 Municipal Credit are associated (or correlated) with Tekla World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla World Healthcare has no effect on the direction of Nuveen Municipal i.e., Nuveen Municipal and Tekla World go up and down completely randomly.

Pair Corralation between Nuveen Municipal and Tekla World

Given the investment horizon of 90 days Nuveen Municipal Credit is expected to generate 0.86 times more return on investment than Tekla World. However, Nuveen Municipal Credit is 1.16 times less risky than Tekla World. It trades about -0.01 of its potential returns per unit of risk. Tekla World Healthcare is currently generating about -0.09 per unit of risk. If you would invest  1,137  in Nuveen Municipal Credit on September 4, 2024 and sell it today you would lose (6.00) from holding Nuveen Municipal Credit or give up 0.53% of portfolio value over 90 days.

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

Nuveen Municipal Credit  vs.  Tekla World Healthcare

Nuveen Municipal Credit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tekla World Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla World Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable technical indicators, Tekla World is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nuveen Municipal and Tekla World

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

The idea behind Nuveen Municipal Credit and Tekla World Healthcare 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.