Correlation Between First Trust and Nuveen Multi
Can any of the company-specific risk be diversified away by investing in both First Trust and Nuveen Multi 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 Multi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust High and Nuveen Multi Mrkt, you can compare the effects of market volatilities on First Trust and Nuveen Multi 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 Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Nuveen Multi.
Diversification Opportunities for First Trust and Nuveen Multi
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Nuveen is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Trust High and Nuveen Multi Mrkt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Multi Mrkt 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 High are associated (or correlated) with Nuveen Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Multi Mrkt has no effect on the direction of First Trust i.e., First Trust and Nuveen Multi go up and down completely randomly.
Pair Corralation between First Trust and Nuveen Multi
Given the investment horizon of 90 days First Trust High is expected to generate 0.94 times more return on investment than Nuveen Multi. However, First Trust High is 1.07 times less risky than Nuveen Multi. It trades about 0.11 of its potential returns per unit of risk. Nuveen Multi Mrkt is currently generating about 0.01 per unit of risk. If you would invest 1,461 in First Trust High on August 28, 2024 and sell it today you would earn a total of 21.00 from holding First Trust High or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust High vs. Nuveen Multi Mrkt
Performance |
| Timeline |
| First Trust High |
| Nuveen Multi Mrkt |
First Trust and Nuveen Multi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Nuveen Multi
The main advantage of trading using opposite First Trust and Nuveen Multi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Nuveen Multi 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 Multi will offset losses from the drop in Nuveen Multi's long position.| First Trust vs. Invesco High Income | First Trust vs. MFS Investment Grade | First Trust vs. Eaton Vance National | First Trust vs. DTF Tax Free |
| Nuveen Multi vs. Invesco High Income | Nuveen Multi vs. MFS Investment Grade | Nuveen Multi vs. Eaton Vance National | Nuveen Multi vs. Abrdn Emerging Markets |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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