Correlation Between Nuveen California and Invesco Pennsylvania

Can any of the company-specific risk be diversified away by investing in both Nuveen California and Invesco Pennsylvania 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 Invesco Pennsylvania 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 Invesco Pennsylvania Value, you can compare the effects of market volatilities on Nuveen California and Invesco Pennsylvania 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 Invesco Pennsylvania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen California and Invesco Pennsylvania.

Diversification Opportunities for Nuveen California and Invesco Pennsylvania

0.04

Correlation Coefficient

Nuveen California  Invesco Pennsylvania

Significant diversification

The 3 months correlation between Nuveen and Invesco is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Select and Invesco Pennsylvania Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Pennsylvania 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 Invesco Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Pennsylvania has no effect on the direction of Nuveen California i.e., Nuveen California and Invesco Pennsylvania go up and down completely randomly.

Pair Corralation between Nuveen California and Invesco Pennsylvania

Considering the 90-day investment horizon Nuveen California Select is expected to under-perform the Invesco Pennsylvania. In addition to that, Nuveen California is 1.37 times more volatile than Invesco Pennsylvania Value. It trades about -0.1 of its total potential returns per unit of risk. Invesco Pennsylvania Value is currently generating about 0.02 per unit of volatility. If you would invest  1,109  in Invesco Pennsylvania Value on September 13, 2024 and sell it today you would earn a total of  7.00  from holding Invesco Pennsylvania Value or generate 0.63% return on investment over 90 days.

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

Nuveen California Select  vs.  Invesco Pennsylvania Value

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.

Invesco Pennsylvania

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Pennsylvania Value are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Pennsylvania 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 California and Invesco Pennsylvania

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

The idea behind Nuveen California Select and Invesco Pennsylvania Value 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.