Correlation Between Franklin Resources and NI Holdings

Can any of the company-specific risk be diversified away by investing in both Franklin Resources and NI Holdings 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 Resources and NI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin Resources and NI Holdings, you can compare the effects of market volatilities on Franklin Resources and NI Holdings 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 Resources with a short position of NI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Resources and NI Holdings.

Diversification Opportunities for Franklin Resources and NI Holdings

0.44

Correlation Coefficient

Franklin Resources  NI Holdings

Very weak diversification

The 3 months correlation between Franklin and NODK is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and Franklin Resources 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 Resources are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Franklin Resources i.e., Franklin Resources and NI Holdings go up and down completely randomly.

Pair Corralation between Franklin Resources and NI Holdings

Considering the 90-day investment horizon Franklin Resources is expected to generate 1.36 times more return on investment than NI Holdings. However, Franklin Resources is 1.36 times more volatile than NI Holdings. It trades about -0.01 of its potential returns per unit of risk. NI Holdings is currently generating about -0.1 per unit of risk. If you would invest  2,064  in Franklin Resources on December 25, 2024 and sell it today you would lose (57.00) from holding Franklin Resources or give up 2.76% of portfolio value over 90 days.

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

Franklin Resources  vs.  NI Holdings

Franklin Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Franklin Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Franklin Resources and NI Holdings

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

The idea behind Franklin Resources and NI Holdings 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 Anywhere module to track or share privately all of your investments from the convenience of any device.