Correlation Between First Trust and Nuveen Mortgage
Can any of the company-specific risk be diversified away by investing in both First Trust and Nuveen Mortgage 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 First Trust and Nuveen Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and Nuveen Mortgage Opportunity, you can compare the effects of market volatilities on First Trust and Nuveen Mortgage 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 First Trust with a short position of Nuveen Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Nuveen Mortgage.
Diversification Opportunities for First Trust and Nuveen Mortgage
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Nuveen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Nuveen Mortgage Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Mortgage Oppo and First Trust 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 First Trust Senior are associated (or correlated) with Nuveen Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Mortgage Oppo has no effect on the direction of First Trust i.e., First Trust and Nuveen Mortgage go up and down completely randomly.
Pair Corralation between First Trust and Nuveen Mortgage
Considering the 90-day investment horizon First Trust Senior is expected to generate 1.11 times more return on investment than Nuveen Mortgage. However, First Trust is 1.11 times more volatile than Nuveen Mortgage Opportunity. It trades about 0.16 of its potential returns per unit of risk. Nuveen Mortgage Opportunity is currently generating about 0.06 per unit of risk. If you would invest 1,008 in First Trust Senior on August 28, 2024 and sell it today you would earn a total of 36.00 from holding First Trust Senior or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Senior vs. Nuveen Mortgage Opportunity
Performance |
| Timeline |
| First Trust Senior |
| Nuveen Mortgage Oppo |
First Trust and Nuveen Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Nuveen Mortgage
The main advantage of trading using opposite First Trust and Nuveen Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Nuveen Mortgage 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 Mortgage will offset losses from the drop in Nuveen Mortgage's long position.| First Trust vs. Blackstone Gso Long | First Trust vs. Eaton Vance Senior | First Trust vs. Western Asset Global | First Trust vs. Western Asset Global |
| Nuveen Mortgage vs. Western Asset High | Nuveen Mortgage vs. Pioneer Municipal High | Nuveen Mortgage vs. The Gabelli Equity | Nuveen Mortgage vs. Eaton Vance National |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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