Correlation Between Franklin Founding and Nicholas
Can any of the company-specific risk be diversified away by investing in both Franklin Founding and Nicholas 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 Franklin Founding and Nicholas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Founding Funds and Nicholas Ltd Edition, you can compare the effects of market volatilities on Franklin Founding and Nicholas 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 Franklin Founding with a short position of Nicholas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Founding and Nicholas.
Diversification Opportunities for Franklin Founding and Nicholas
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Nicholas is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Founding Funds and Nicholas Ltd Edition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Edition and Franklin Founding 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 Franklin Founding Funds are associated (or correlated) with Nicholas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Edition has no effect on the direction of Franklin Founding i.e., Franklin Founding and Nicholas go up and down completely randomly.
Pair Corralation between Franklin Founding and Nicholas
Assuming the 90 days horizon Franklin Founding is expected to generate 2.63 times less return on investment than Nicholas. But when comparing it to its historical volatility, Franklin Founding Funds is 1.9 times less risky than Nicholas. It trades about 0.09 of its potential returns per unit of risk. Nicholas Ltd Edition is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,799 in Nicholas Ltd Edition on September 1, 2024 and sell it today you would earn a total of 514.00 from holding Nicholas Ltd Edition or generate 18.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Franklin Founding Funds vs. Nicholas Ltd Edition
Performance |
| Timeline |
| Franklin Founding Funds |
| Nicholas Edition |
Franklin Founding and Nicholas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Founding and Nicholas
The main advantage of trading using opposite Franklin Founding and Nicholas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Founding position performs unexpectedly, Nicholas 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 Nicholas will offset losses from the drop in Nicholas' long position.| Franklin Founding vs. Us Government Securities | Franklin Founding vs. Virtus Seix Government | Franklin Founding vs. Prudential Government Income | Franklin Founding vs. Government Securities Fund |
| Nicholas vs. Dreyfus Government Cash | Nicholas vs. Prudential Government Income | Nicholas vs. Lord Abbett Government | Nicholas vs. Government Securities Fund |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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