Correlation Between Nuveen Floating and First Trust

Can any of the company-specific risk be diversified away by investing in both Nuveen Floating 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 Floating 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 Floating Rate and First Trust Senior, you can compare the effects of market volatilities on Nuveen Floating 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 Floating with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Floating and First Trust.

Diversification Opportunities for Nuveen Floating and First Trust

0.89

Correlation Coefficient

Nuveen Floating  First Trust

Very poor diversification

The 3 months correlation between Nuveen and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Floating Rate and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and Nuveen Floating 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 Floating Rate 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 Senior has no effect on the direction of Nuveen Floating i.e., Nuveen Floating and First Trust go up and down completely randomly.

Pair Corralation between Nuveen Floating and First Trust

Considering the 90-day investment horizon Nuveen Floating Rate is expected to generate 1.03 times more return on investment than First Trust. However, Nuveen Floating is 1.03 times more volatile than First Trust Senior. It trades about 0.16 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.09 per unit of risk. If you would invest  864.00  in Nuveen Floating Rate on September 3, 2024 and sell it today you would earn a total of  48.00  from holding Nuveen Floating Rate or generate 5.56% return on investment over 90 days.

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

Nuveen Floating Rate  vs.  First Trust Senior

Nuveen Floating Rate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Floating Rate are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable technical and fundamental indicators, Nuveen Floating is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First Trust Senior

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nuveen Floating and First Trust

The main advantage of trading using opposite Nuveen Floating and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Floating 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.

The idea behind Nuveen Floating Rate and First Trust Senior 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.