Correlation Between First Trust and Nuveen ESG
Can any of the company-specific risk be diversified away by investing in both First Trust and Nuveen ESG 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 ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Large and Nuveen ESG Mid Cap, you can compare the effects of market volatilities on First Trust and Nuveen ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Nuveen ESG.
Diversification Opportunities for First Trust and Nuveen ESG
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Nuveen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Large and Nuveen ESG Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Mid 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 Large are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG Mid has no effect on the direction of First Trust i.e., First Trust and Nuveen ESG go up and down completely randomly.
Pair Corralation between First Trust and Nuveen ESG
Considering the 90-day investment horizon First Trust is expected to generate 1.08 times less return on investment than Nuveen ESG. But when comparing it to its historical volatility, First Trust Large is 1.08 times less risky than Nuveen ESG. It trades about 0.09 of its potential returns per unit of risk. Nuveen ESG Mid Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,779 in Nuveen ESG Mid Cap on August 27, 2024 and sell it today you would earn a total of 993.00 from holding Nuveen ESG Mid Cap or generate 35.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Large vs. Nuveen ESG Mid Cap
Performance |
| Timeline |
| First Trust Large |
| Nuveen ESG Mid |
First Trust and Nuveen ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Nuveen ESG
The main advantage of trading using opposite First Trust and Nuveen ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Nuveen ESG 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 ESG will offset losses from the drop in Nuveen ESG's long position.| First Trust vs. First Trust Large | First Trust vs. First Trust Large | First Trust vs. First Trust Small | First Trust vs. First Trust Mid |
| Nuveen ESG vs. Nuveen ESG Small Cap | Nuveen ESG vs. Nuveen ESG Mid Cap | Nuveen ESG vs. Nuveen ESG Large Cap | Nuveen ESG vs. Nuveen ESG Large 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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