Correlation Between Nuveen Mortgage and First Trust

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

Diversification Opportunities for Nuveen Mortgage and First Trust

0.91

Correlation Coefficient

Nuveen Mortgage  First Trust

Almost no diversification

The 3 months correlation between Nuveen and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Mortgage Opportunity and First Trust Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Intermediate and Nuveen Mortgage 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 Mortgage Opportunity 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 Intermediate has no effect on the direction of Nuveen Mortgage i.e., Nuveen Mortgage and First Trust go up and down completely randomly.

Pair Corralation between Nuveen Mortgage and First Trust

Considering the 90-day investment horizon Nuveen Mortgage is expected to generate 2.45 times less return on investment than First Trust. In addition to that, Nuveen Mortgage is 1.27 times more volatile than First Trust Intermediate. It trades about 0.33 of its total potential returns per unit of risk. First Trust Intermediate is currently generating about 1.02 per unit of volatility. If you would invest  1,686  in First Trust Intermediate on February 17, 2025 and sell it today you would earn a total of  133.00  from holding First Trust Intermediate or generate 7.89% return on investment over 90 days.

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

Nuveen Mortgage Opportunity  vs.  First Trust Intermediate

Nuveen Mortgage Oppo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Mortgage Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Nuveen Mortgage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Intermediate

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Intermediate has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nuveen Mortgage and First Trust

The main advantage of trading using opposite Nuveen Mortgage and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Mortgage 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 Mortgage Opportunity and First Trust Intermediate 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.