Correlation Between Franklin Liberty and SPDR Nuveen

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

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

Diversification Opportunities for Franklin Liberty and SPDR Nuveen

0.93

Correlation Coefficient

Franklin Liberty  SPDR Nuveen

Almost no diversification

The 3 months correlation between Franklin and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Intermediate and SPDR Nuveen Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Nuveen Municipal and Franklin Liberty 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 Liberty Intermediate are associated (or correlated) with SPDR Nuveen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Nuveen Municipal has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and SPDR Nuveen go up and down completely randomly.

Pair Corralation between Franklin Liberty and SPDR Nuveen

Given the investment horizon of 90 days Franklin Liberty Intermediate is expected to under-perform the SPDR Nuveen. But the etf apears to be less risky and, when comparing its historical volatility, Franklin Liberty Intermediate is 1.13 times less risky than SPDR Nuveen. The etf trades about -0.31 of its potential returns per unit of risk. The SPDR Nuveen Municipal is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  2,781  in SPDR Nuveen Municipal on October 3, 2024 and sell it today you would lose (32.00) from holding SPDR Nuveen Municipal or give up 1.15% of portfolio value over 90 days.

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

Franklin Liberty Intermediate  vs.  SPDR Nuveen Municipal

Franklin Liberty Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Franklin Liberty is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

SPDR Nuveen Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Nuveen Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Nuveen is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Franklin Liberty and SPDR Nuveen

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

The idea behind Franklin Liberty Intermediate and SPDR Nuveen Municipal 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.