Correlation Between First Trust and Nuveen Pennsylvania
Can any of the company-specific risk be diversified away by investing in both First Trust and Nuveen Pennsylvania 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 Pennsylvania into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Mortgage and Nuveen Pennsylvania Quality, you can compare the effects of market volatilities on First Trust and Nuveen Pennsylvania 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 Pennsylvania. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Nuveen Pennsylvania.
Diversification Opportunities for First Trust and Nuveen Pennsylvania
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Nuveen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mortgage and Nuveen Pennsylvania Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Pennsylvania 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 Mortgage are associated (or correlated) with Nuveen Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Pennsylvania has no effect on the direction of First Trust i.e., First Trust and Nuveen Pennsylvania go up and down completely randomly.
Pair Corralation between First Trust and Nuveen Pennsylvania
Considering the 90-day investment horizon First Trust is expected to generate 5.36 times less return on investment than Nuveen Pennsylvania. In addition to that, First Trust is 1.97 times more volatile than Nuveen Pennsylvania Quality. It trades about 0.02 of its total potential returns per unit of risk. Nuveen Pennsylvania Quality is currently generating about 0.26 per unit of volatility. If you would invest 1,177 in Nuveen Pennsylvania Quality on September 4, 2024 and sell it today you would earn a total of 33.00 from holding Nuveen Pennsylvania Quality or generate 2.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Mortgage vs. Nuveen Pennsylvania Quality
Performance |
| Timeline |
| First Trust Mortgage |
| Nuveen Pennsylvania |
First Trust and Nuveen Pennsylvania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Nuveen Pennsylvania
The main advantage of trading using opposite First Trust and Nuveen Pennsylvania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Nuveen Pennsylvania 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 Pennsylvania will offset losses from the drop in Nuveen Pennsylvania's long position.| First Trust vs. First Trust Senior | First Trust vs. Western Asset Global | First Trust vs. Western Asset Global | First Trust vs. BlackRock Floating Rate |
| Nuveen Pennsylvania vs. Invesco Trust For | Nuveen Pennsylvania vs. Invesco California Value | Nuveen Pennsylvania vs. GAMCO Natural Resources | Nuveen Pennsylvania vs. Invesco Advantage MIT |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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