Correlation Between Invesco NASDAQ and Nuveen ESG

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

By analyzing existing cross correlation between Invesco NASDAQ 100 and Nuveen ESG Mid Cap, you can compare the effects of market volatilities on Invesco NASDAQ 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 Invesco NASDAQ with a short position of Nuveen ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and Nuveen ESG.

Diversification Opportunities for Invesco NASDAQ and Nuveen ESG

0.9

Correlation Coefficient

Invesco NASDAQ  Nuveen ESG

Almost no diversification

The 3 months correlation between Invesco and Nuveen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ 100 and Nuveen ESG Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Mid and Invesco NASDAQ 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 Invesco NASDAQ 100 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 Mid has no effect on the direction of Invesco NASDAQ i.e., Invesco NASDAQ and Nuveen ESG go up and down completely randomly.

Pair Corralation between Invesco NASDAQ and Nuveen ESG

Given the investment horizon of 90 days Invesco NASDAQ is expected to generate 1.29 times less return on investment than Nuveen ESG. But when comparing it to its historical volatility, Invesco NASDAQ 100 is 1.06 times less risky than Nuveen ESG. It trades about 0.11 of its potential returns per unit of risk. Nuveen ESG Mid Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,440  in Nuveen ESG Mid Cap on September 23, 2024 and sell it today you would earn a total of  433.00  from holding Nuveen ESG Mid Cap or generate 9.75% return on investment over 90 days.

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

Invesco NASDAQ 100  vs.  Nuveen ESG Mid Cap

Invesco NASDAQ 100

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco NASDAQ 100 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish basic indicators, Invesco NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Invesco NASDAQ and Nuveen ESG

The main advantage of trading using opposite Invesco NASDAQ and Nuveen ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco NASDAQ 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 Invesco NASDAQ 100 and Nuveen ESG Mid Cap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..