Correlation Between Franklin Floating and Nordea Norwegian

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

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

Diversification Opportunities for Franklin Floating and Nordea Norwegian

0.46

Correlation Coefficient

Franklin Floating  Nordea Norwegian

Very weak diversification

The 3 months correlation between Franklin and Nordea is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Floating Rate and Nordea Norwegian Stars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Norwegian Stars and Franklin Floating 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 Floating Rate are associated (or correlated) with Nordea Norwegian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Norwegian Stars has no effect on the direction of Franklin Floating i.e., Franklin Floating and Nordea Norwegian go up and down completely randomly.

Pair Corralation between Franklin Floating and Nordea Norwegian

Assuming the 90 days trading horizon Franklin Floating Rate is expected to under-perform the Nordea Norwegian. But the fund apears to be less risky and, when comparing its historical volatility, Franklin Floating Rate is 2.43 times less risky than Nordea Norwegian. The fund trades about -0.2 of its potential returns per unit of risk. The Nordea Norwegian Stars is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16,966  in Nordea Norwegian Stars on October 11, 2024 and sell it today you would earn a total of  41.00  from holding Nordea Norwegian Stars or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Franklin Floating Rate  vs.  Nordea Norwegian Stars

Franklin Floating Rate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Franklin Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nordea Norwegian Stars

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Norwegian Stars are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong forward indicators, Nordea Norwegian is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Franklin Floating and Nordea Norwegian

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

The idea behind Franklin Floating Rate and Nordea Norwegian Stars 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.