Correlation Between First American and Nuveen Small
Can any of the company-specific risk be diversified away by investing in both First American and Nuveen Small 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 American and Nuveen Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Investment and Nuveen Small Cap, you can compare the effects of market volatilities on First American and Nuveen Small 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 American with a short position of Nuveen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Nuveen Small.
Diversification Opportunities for First American and Nuveen Small
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and Nuveen is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding First American Investment and Nuveen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Small Cap and First American 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 American Investment are associated (or correlated) with Nuveen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Small Cap has no effect on the direction of First American i.e., First American and Nuveen Small go up and down completely randomly.
Pair Corralation between First American and Nuveen Small
Assuming the 90 days horizon First American Investment is expected to generate 1.0 times more return on investment than Nuveen Small. However, First American is 1.0 times more volatile than Nuveen Small Cap. It trades about 0.06 of its potential returns per unit of risk. Nuveen Small Cap is currently generating about 0.05 per unit of risk. If you would invest 2,658 in First American Investment on August 28, 2024 and sell it today you would earn a total of 958.00 from holding First American Investment or generate 36.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First American Investment vs. Nuveen Small Cap
Performance |
| Timeline |
| First American Investment |
| Nuveen Small Cap |
First American and Nuveen Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and Nuveen Small
The main advantage of trading using opposite First American and Nuveen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, Nuveen Small 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 Small will offset losses from the drop in Nuveen Small's long position.| First American vs. Nuveen Mid Cap | First American vs. Nuveen Mid Cap | First American vs. Nuveen Small Cap | First American vs. Nuveen Small Cap |
| Nuveen Small vs. Nuveen Small Cap | Nuveen Small vs. Nuveen Small Cap | Nuveen Small vs. First American Investment | Nuveen Small vs. Nuveen Mid Cap |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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