Correlation Between Nuveen Santa and Capital World

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

By analyzing existing cross correlation between Nuveen Santa Barbara and Capital World Growth, you can compare the effects of market volatilities on Nuveen Santa and Capital World 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 Santa with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Santa and Capital World.

Diversification Opportunities for Nuveen Santa and Capital World

0.86

Correlation Coefficient

Nuveen Santa  Capital World

Very poor diversification

The 3 months correlation between Nuveen and Capital is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Santa Barbara and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Nuveen Santa 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 Santa Barbara are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Nuveen Santa i.e., Nuveen Santa and Capital World go up and down completely randomly.

Pair Corralation between Nuveen Santa and Capital World

Assuming the 90 days horizon Nuveen Santa is expected to generate 1.48 times less return on investment than Capital World. But when comparing it to its historical volatility, Nuveen Santa Barbara is 1.06 times less risky than Capital World. It trades about 0.03 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,245  in Capital World Growth on January 24, 2024 and sell it today you would earn a total of  993.00  from holding Capital World Growth or generate 18.93% return on investment over 90 days.

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

Nuveen Santa Barbara  vs.  Capital World Growth

Nuveen Santa Barbara

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Santa Barbara are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Nuveen Santa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capital World Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuveen Santa and Capital World

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

The idea behind Nuveen Santa Barbara and Capital World Growth 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.