Correlation Between Franklin Floating and KLP AksjeGlobal

Can any of the company-specific risk be diversified away by investing in both Franklin Floating and KLP AksjeGlobal 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 KLP AksjeGlobal 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 KLP AksjeGlobal Indeks, you can compare the effects of market volatilities on Franklin Floating and KLP AksjeGlobal 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 KLP AksjeGlobal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Floating and KLP AksjeGlobal.

Diversification Opportunities for Franklin Floating and KLP AksjeGlobal

0.54

Correlation Coefficient

Franklin Floating  KLP AksjeGlobal

Very weak diversification

The 3 months correlation between Franklin and KLP is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Floating Rate and KLP AksjeGlobal Indeks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLP AksjeGlobal Indeks 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 KLP AksjeGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLP AksjeGlobal Indeks has no effect on the direction of Franklin Floating i.e., Franklin Floating and KLP AksjeGlobal go up and down completely randomly.

Pair Corralation between Franklin Floating and KLP AksjeGlobal

Assuming the 90 days trading horizon Franklin Floating Rate is expected to generate 0.17 times more return on investment than KLP AksjeGlobal. However, Franklin Floating Rate is 6.03 times less risky than KLP AksjeGlobal. It trades about 0.08 of its potential returns per unit of risk. KLP AksjeGlobal Indeks is currently generating about -0.04 per unit of risk. If you would invest  1,849  in Franklin Floating Rate on December 5, 2024 and sell it today you would earn a total of  10.00  from holding Franklin Floating Rate or generate 0.54% return on investment over 90 days.

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

Franklin Floating Rate  vs.  KLP AksjeGlobal Indeks

Franklin Floating Rate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental indicators, Franklin Floating is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

KLP AksjeGlobal Indeks

Risk-Adjusted Performance

Very Weak

Over the last 90 days KLP AksjeGlobal Indeks has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, KLP AksjeGlobal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Floating and KLP AksjeGlobal

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

The idea behind Franklin Floating Rate and KLP AksjeGlobal Indeks 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.