Correlation Between Northern Small and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Northern Small and Franklin Mutual 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 Northern Small and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Small Cap and Franklin Mutual European, you can compare the effects of market volatilities on Northern Small and Franklin Mutual 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 Northern Small with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Franklin Mutual.
Diversification Opportunities for Northern Small and Franklin Mutual
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NORTHERN and Franklin is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Franklin Mutual European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual European and Northern Small 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 Northern Small Cap are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual European has no effect on the direction of Northern Small i.e., Northern Small and Franklin Mutual go up and down completely randomly.
Pair Corralation between Northern Small and Franklin Mutual
Assuming the 90 days horizon Northern Small Cap is expected to generate 1.6 times more return on investment than Franklin Mutual. However, Northern Small is 1.6 times more volatile than Franklin Mutual European. It trades about 0.06 of its potential returns per unit of risk. Franklin Mutual European is currently generating about 0.05 per unit of risk. If you would invest 1,180 in Northern Small Cap on September 4, 2024 and sell it today you would earn a total of 439.00 from holding Northern Small Cap or generate 37.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Franklin Mutual European
Performance |
| Timeline |
| Northern Small Cap |
| Franklin Mutual European |
Northern Small and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Franklin Mutual
The main advantage of trading using opposite Northern Small and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, Franklin Mutual 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 Franklin Mutual will offset losses from the drop in Franklin Mutual's long position.| Northern Small vs. Northern Bond Index | Northern Small vs. Northern E Bond | Northern Small vs. Northern Fixed Income | Northern Small vs. Northern Income Equity |
| Franklin Mutual vs. Franklin Mutual Beacon | Franklin Mutual vs. Templeton Developing Markets | Franklin Mutual vs. Franklin Mutual Global | Franklin Mutual vs. Franklin Mutual Global |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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