Correlation Between Franklin Templeton and Northern Lights

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

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

Diversification Opportunities for Franklin Templeton and Northern Lights

-0.71

Correlation Coefficient

Franklin Templeton  Northern Lights

Pay attention - limited upside

The 3 months correlation between Franklin and Northern is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton ETF and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Franklin Templeton 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 Templeton ETF are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and Northern Lights go up and down completely randomly.

Pair Corralation between Franklin Templeton and Northern Lights

Given the investment horizon of 90 days Franklin Templeton ETF is expected to under-perform the Northern Lights. In addition to that, Franklin Templeton is 1.13 times more volatile than Northern Lights. It trades about -0.07 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.09 per unit of volatility. If you would invest  3,304  in Northern Lights on October 1, 2024 and sell it today you would earn a total of  170.00  from holding Northern Lights or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Franklin Templeton ETF  vs.  Northern Lights

Franklin Templeton ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Northern Lights

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Northern Lights is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Franklin Templeton and Northern Lights

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

The idea behind Franklin Templeton ETF and Northern Lights 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.