Correlation Between Nuveen California and Central Securities

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

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

Diversification Opportunities for Nuveen California and Central Securities

-0.6

Correlation Coefficient

Nuveen California  Central Securities

Excellent diversification

The 3 months correlation between Nuveen and Central is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Select and Central Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Securities and Nuveen California 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 California Select are associated (or correlated) with Central Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Securities has no effect on the direction of Nuveen California i.e., Nuveen California and Central Securities go up and down completely randomly.

Pair Corralation between Nuveen California and Central Securities

Considering the 90-day investment horizon Nuveen California Select is expected to under-perform the Central Securities. But the stock apears to be less risky and, when comparing its historical volatility, Nuveen California Select is 1.04 times less risky than Central Securities. The stock trades about -0.04 of its potential returns per unit of risk. The Central Securities is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,246  in Central Securities on September 5, 2024 and sell it today you would earn a total of  503.00  from holding Central Securities or generate 11.85% return on investment over 90 days.

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

Nuveen California Select  vs.  Central Securities

Nuveen California Select

Risk-Adjusted Performance

0 of 100

Very Weak

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

Central Securities

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Securities are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Central Securities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nuveen California and Central Securities

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

The idea behind Nuveen California Select and Central Securities 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.