Correlation Between First American and Nuveen High

Can any of the company-specific risk be diversified away by investing in both First American and Nuveen High 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 High 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 High Income, you can compare the effects of market volatilities on First American and Nuveen High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Nuveen High.

Diversification Opportunities for First American and Nuveen High

0.86

Correlation Coefficient

First American  Nuveen High

Very poor diversification

The 3 months correlation between First and Nuveen is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First American Investment and Nuveen High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen High Income 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen High Income has no effect on the direction of First American i.e., First American and Nuveen High go up and down completely randomly.

Pair Corralation between First American and Nuveen High

Assuming the 90 days horizon First American Investment is expected to generate 6.69 times more return on investment than Nuveen High. However, First American is 6.69 times more volatile than Nuveen High Income. It trades about 0.16 of its potential returns per unit of risk. Nuveen High Income is currently generating about 0.24 per unit of risk. If you would invest  3,098  in First American Investment on September 12, 2024 and sell it today you would earn a total of  423.00  from holding First American Investment or generate 13.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

First American Investment  vs.  Nuveen High Income

First American Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First American Investment are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, First American showed solid returns over the last few months and may actually be approaching a breakup point.

Nuveen High Income

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen High Income are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First American and Nuveen High

The main advantage of trading using opposite First American and Nuveen High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, Nuveen High 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 High will offset losses from the drop in Nuveen High's long position.

The idea behind First American Investment and Nuveen High Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.