Correlation Between IPath Series and Nuveen SP

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

By analyzing existing cross correlation between iPath Series B and Nuveen SP 500, you can compare the effects of market volatilities on IPath Series and Nuveen SP 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 IPath Series with a short position of Nuveen SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Series and Nuveen SP.

Diversification Opportunities for IPath Series and Nuveen SP

-0.38

Correlation Coefficient

IPath Series  Nuveen SP

Very good diversification

The 3 months correlation between IPath and Nuveen is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B and Nuveen SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen SP 500 and IPath Series 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 iPath Series B are associated (or correlated) with Nuveen SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen SP 500 has no effect on the direction of IPath Series i.e., IPath Series and Nuveen SP go up and down completely randomly.

Pair Corralation between IPath Series and Nuveen SP

Considering the 90-day investment horizon iPath Series B is expected to under-perform the Nuveen SP. In addition to that, IPath Series is 6.57 times more volatile than Nuveen SP 500. It trades about -0.09 of its total potential returns per unit of risk. Nuveen SP 500 is currently generating about 0.2 per unit of volatility. If you would invest  1,316  in Nuveen SP 500 on September 4, 2024 and sell it today you would earn a total of  95.00  from holding Nuveen SP 500 or generate 7.22% return on investment over 90 days.

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

iPath Series B  vs.  Nuveen SP 500

iPath Series B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Nuveen SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Nuveen SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IPath Series and Nuveen SP

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

The idea behind iPath Series B and Nuveen SP 500 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .