Correlation Between NuShares Enhanced and Nuveen ESG

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

By analyzing existing cross correlation between NuShares Enhanced Yield and Nuveen ESG Aggregate, you can compare the effects of market volatilities on NuShares Enhanced and Nuveen ESG 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 NuShares Enhanced with a short position of Nuveen ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of NuShares Enhanced and Nuveen ESG.

Diversification Opportunities for NuShares Enhanced and Nuveen ESG

0.98

Correlation Coefficient

NuShares Enhanced  Nuveen ESG

Almost no diversification

The 3 months correlation between NuShares and Nuveen is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding NuShares Enhanced Yield and Nuveen ESG Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Aggregate and NuShares Enhanced 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 NuShares Enhanced Yield are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG Aggregate has no effect on the direction of NuShares Enhanced i.e., NuShares Enhanced and Nuveen ESG go up and down completely randomly.

Pair Corralation between NuShares Enhanced and Nuveen ESG

Given the investment horizon of 90 days NuShares Enhanced Yield is expected to generate 1.07 times more return on investment than Nuveen ESG. However, NuShares Enhanced is 1.07 times more volatile than Nuveen ESG Aggregate. It trades about 0.03 of its potential returns per unit of risk. Nuveen ESG Aggregate is currently generating about -0.03 per unit of risk. If you would invest  2,113  in NuShares Enhanced Yield on September 3, 2024 and sell it today you would earn a total of  11.00  from holding NuShares Enhanced Yield or generate 0.52% return on investment over 90 days.

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

NuShares Enhanced Yield  vs.  Nuveen ESG Aggregate

NuShares Enhanced Yield

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NuShares Enhanced Yield are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NuShares Enhanced is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nuveen ESG Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen ESG Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Nuveen ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NuShares Enhanced and Nuveen ESG

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

The idea behind NuShares Enhanced Yield and Nuveen ESG Aggregate 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.