Correlation Between Nuveen Preferred and First Trust
Can any of the company-specific risk be diversified away by investing in both Nuveen Preferred and First Trust 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 Nuveen Preferred and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nuveen Preferred and and First Trust Dorsey, you can compare the effects of market volatilities on Nuveen Preferred and First Trust 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 Nuveen Preferred with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Preferred and First Trust.
Diversification Opportunities for Nuveen Preferred and First Trust
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nuveen and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Preferred and and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and Nuveen Preferred 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 Nuveen Preferred and are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of Nuveen Preferred i.e., Nuveen Preferred and First Trust go up and down completely randomly.
Pair Corralation between Nuveen Preferred and First Trust
Given the investment horizon of 90 days Nuveen Preferred is expected to generate 3.91 times less return on investment than First Trust. But when comparing it to its historical volatility, Nuveen Preferred and is 7.73 times less risky than First Trust. It trades about 0.19 of its potential returns per unit of risk. First Trust Dorsey is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,476 in First Trust Dorsey on September 4, 2024 and sell it today you would earn a total of 1,735 from holding First Trust Dorsey or generate 38.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 64.83% |
| Values | Daily Returns |
Nuveen Preferred and vs. First Trust Dorsey
Performance |
| Timeline |
| Nuveen Preferred |
| First Trust Dorsey |
Nuveen Preferred and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nuveen Preferred and First Trust
The main advantage of trading using opposite Nuveen Preferred and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Preferred position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Nuveen Preferred vs. First Trust Dorsey | Nuveen Preferred vs. Direxion Daily MSCI | Nuveen Preferred vs. MFUT | Nuveen Preferred vs. VanEck Morningstar Wide |
| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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