Correlation Between Franklin Floating and Nordea North

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

Diversification Opportunities for Franklin Floating and Nordea North

0.92

Correlation Coefficient

Franklin Floating  Nordea North

Almost no diversification

The 3 months correlation between Franklin and Nordea is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Floating Rate and Nordea North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea North American 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 North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea North American has no effect on the direction of Franklin Floating i.e., Franklin Floating and Nordea North go up and down completely randomly.

Pair Corralation between Franklin Floating and Nordea North

Assuming the 90 days trading horizon Franklin Floating is expected to generate 4.06 times less return on investment than Nordea North. But when comparing it to its historical volatility, Franklin Floating Rate is 9.24 times less risky than Nordea North. It trades about 0.21 of its potential returns per unit of risk. Nordea North American is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  45,702  in Nordea North American on October 11, 2024 and sell it today you would earn a total of  2,119  from holding Nordea North American or generate 4.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Franklin Floating Rate  vs.  Nordea North American

Franklin Floating Rate

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 16 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Nordea North American

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea North American are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable technical and fundamental indicators, Nordea North is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franklin Floating and Nordea North

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

The idea behind Franklin Floating Rate and Nordea North American 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.