Correlation Between Nuveen New and First Trust

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

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

Diversification Opportunities for Nuveen New and First Trust

0.06

Correlation Coefficient

Nuveen New  First Trust

Significant diversification

The 3 months correlation between Nuveen and First is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen New York and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and Nuveen New 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 New York are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Enhanced has no effect on the direction of Nuveen New i.e., Nuveen New and First Trust go up and down completely randomly.

Pair Corralation between Nuveen New and First Trust

Considering the 90-day investment horizon Nuveen New York is expected to generate 0.6 times more return on investment than First Trust. However, Nuveen New York is 1.68 times less risky than First Trust. It trades about 0.12 of its potential returns per unit of risk. First Trust Enhanced is currently generating about -0.04 per unit of risk. If you would invest  1,095  in Nuveen New York on December 27, 2024 and sell it today you would earn a total of  41.00  from holding Nuveen New York or generate 3.74% return on investment over 90 days.

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

Nuveen New York  vs.  First Trust Enhanced

Nuveen New York

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen New York are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Nuveen New is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Trust Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuveen New and First Trust

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

The idea behind Nuveen New York and First Trust Enhanced 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.