Correlation Between Franklin LibertyQ and Nuveen ESG

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

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

Diversification Opportunities for Franklin LibertyQ and Nuveen ESG

0.98

Correlation Coefficient

Franklin LibertyQ  Nuveen ESG

Almost no diversification

The 3 months correlation between Franklin and Nuveen is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Franklin LibertyQ Mid and Nuveen ESG Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Mid and Franklin LibertyQ 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 LibertyQ Mid are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG Mid has no effect on the direction of Franklin LibertyQ i.e., Franklin LibertyQ and Nuveen ESG go up and down completely randomly.

Pair Corralation between Franklin LibertyQ and Nuveen ESG

Given the investment horizon of 90 days Franklin LibertyQ Mid is expected to under-perform the Nuveen ESG. In addition to that, Franklin LibertyQ is 1.06 times more volatile than Nuveen ESG Mid Cap. It trades about -0.05 of its total potential returns per unit of risk. Nuveen ESG Mid Cap is currently generating about -0.04 per unit of volatility. If you would invest  3,472  in Nuveen ESG Mid Cap on December 29, 2024 and sell it today you would lose (78.00) from holding Nuveen ESG Mid Cap or give up 2.25% of portfolio value over 90 days.

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

Franklin LibertyQ Mid  vs.  Nuveen ESG Mid Cap

Franklin LibertyQ Mid

Risk-Adjusted Performance

Very Weak

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

Nuveen ESG Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen ESG Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Nuveen ESG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Franklin LibertyQ and Nuveen ESG

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

The idea behind Franklin LibertyQ Mid and Nuveen ESG Mid Cap 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.