Correlation Between Nuveen Preferred and First Trust

Can any of the company-specific risk be diversified away by investing in both Nuveen Preferred 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 Preferred 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 Preferred and and First Trust Preferred, you can compare the effects of market volatilities on Nuveen Preferred 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 Preferred with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Preferred and First Trust.

Diversification Opportunities for Nuveen Preferred and First Trust

0.44

Correlation Coefficient

Nuveen Preferred  First Trust

Very weak diversification

The 3 months correlation between Nuveen and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Preferred and and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred and Nuveen Preferred 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 Preferred and 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 Preferred has no effect on the direction of Nuveen Preferred i.e., Nuveen Preferred and First Trust go up and down completely randomly.

Pair Corralation between Nuveen Preferred and First Trust

Given the investment horizon of 90 days Nuveen Preferred and is expected to generate 0.32 times more return on investment than First Trust. However, Nuveen Preferred and is 3.12 times less risky than First Trust. It trades about 0.18 of its potential returns per unit of risk. First Trust Preferred is currently generating about 0.05 per unit of risk. If you would invest  2,407  in Nuveen Preferred and on October 11, 2024 and sell it today you would earn a total of  146.00  from holding Nuveen Preferred and or generate 6.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	43.23%
Values	Daily Returns

Nuveen Preferred and  vs.  First Trust Preferred

Nuveen Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Preferred and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Nuveen Preferred is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nuveen Preferred and First Trust

The main advantage of trading using opposite Nuveen Preferred and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Preferred 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 Preferred and and First Trust Preferred 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.