Correlation Between NYSE Composite and Nuveen Dividend

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

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

Diversification Opportunities for NYSE Composite and Nuveen Dividend

0.39

Correlation Coefficient

NYSE Composite  Nuveen Dividend

Weak diversification

The 3 months correlation between NYSE and Nuveen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Nuveen Dividend Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Dividend Advantage and NYSE Composite 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 NYSE Composite are associated (or correlated) with Nuveen Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Dividend Advantage has no effect on the direction of NYSE Composite i.e., NYSE Composite and Nuveen Dividend go up and down completely randomly.

Pair Corralation between NYSE Composite and Nuveen Dividend

Assuming the 90 days trading horizon NYSE Composite is expected to generate 11.22 times less return on investment than Nuveen Dividend. In addition to that, NYSE Composite is 1.15 times more volatile than Nuveen Dividend Advantage. It trades about 0.02 of its total potential returns per unit of risk. Nuveen Dividend Advantage is currently generating about 0.3 per unit of volatility. If you would invest  1,194  in Nuveen Dividend Advantage on September 13, 2024 and sell it today you would earn a total of  28.00  from holding Nuveen Dividend Advantage or generate 2.35% return on investment over 90 days.

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

NYSE Composite  vs.  Nuveen Dividend Advantage

Pair Trading with NYSE Composite and Nuveen Dividend

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

The idea behind NYSE Composite and Nuveen Dividend Advantage 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.