Correlation Between Nuveen Small and First American

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

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

Diversification Opportunities for Nuveen Small and First American

0.9

Correlation Coefficient

Nuveen Small  First American

Almost no diversification

The 3 months correlation between Nuveen and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Small Cap and First American Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Investment and Nuveen Small 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 Small Cap are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Investment has no effect on the direction of Nuveen Small i.e., Nuveen Small and First American go up and down completely randomly.

Pair Corralation between Nuveen Small and First American

Assuming the 90 days horizon Nuveen Small Cap is expected to generate 1.01 times more return on investment than First American. However, Nuveen Small is 1.01 times more volatile than First American Investment. It trades about 0.07 of its potential returns per unit of risk. First American Investment is currently generating about 0.05 per unit of risk. If you would invest  2,251  in Nuveen Small Cap on October 6, 2024 and sell it today you would earn a total of  489.00  from holding Nuveen Small Cap or generate 21.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Nuveen Small Cap  vs.  First American Investment

Nuveen Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nuveen Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

First American Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First American Investment are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First American 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 Small and First American

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

The idea behind Nuveen Small Cap and First American Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.