Correlation Between Nuveen ESG and Fidelity Covington

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

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

Diversification Opportunities for Nuveen ESG and Fidelity Covington

0.46

Correlation Coefficient

Nuveen ESG  Fidelity Covington

Very weak diversification

The 3 months correlation between Nuveen and Fidelity is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG Mid Cap and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust and Nuveen ESG 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 ESG Mid Cap are associated (or correlated) with Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Nuveen ESG i.e., Nuveen ESG and Fidelity Covington go up and down completely randomly.

Pair Corralation between Nuveen ESG and Fidelity Covington

Given the investment horizon of 90 days Nuveen ESG Mid Cap is expected to under-perform the Fidelity Covington. In addition to that, Nuveen ESG is 1.5 times more volatile than Fidelity Covington Trust. It trades about -0.14 of its total potential returns per unit of risk. Fidelity Covington Trust is currently generating about -0.04 per unit of volatility. If you would invest  2,568  in Fidelity Covington Trust on September 27, 2024 and sell it today you would lose (20.00) from holding Fidelity Covington Trust or give up 0.78% of portfolio value over 90 days.

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

Nuveen ESG Mid Cap  vs.  Fidelity Covington Trust

Nuveen ESG Mid

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG Mid Cap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, Nuveen ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Covington Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nuveen ESG and Fidelity Covington

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

The idea behind Nuveen ESG Mid Cap and Fidelity Covington Trust 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.