Correlation Between Nuveen California and Franklin Lifesmart

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

By analyzing existing cross correlation between Nuveen California Municipal and Franklin Lifesmart 2030, you can compare the effects of market volatilities on Nuveen California and Franklin Lifesmart 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 Nuveen California with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen California and Franklin Lifesmart.

Diversification Opportunities for Nuveen California and Franklin Lifesmart

0.42

Correlation Coefficient

Nuveen California  Franklin Lifesmart

Very weak diversification

The 3 months correlation between Nuveen and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Municipal and Franklin Lifesmart 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2030 and Nuveen California 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 Nuveen California Municipal are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2030 has no effect on the direction of Nuveen California i.e., Nuveen California and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Nuveen California and Franklin Lifesmart

Assuming the 90 days horizon Nuveen California Municipal is expected to generate 0.37 times more return on investment than Franklin Lifesmart. However, Nuveen California Municipal is 2.7 times less risky than Franklin Lifesmart. It trades about 0.06 of its potential returns per unit of risk. Franklin Lifesmart 2030 is currently generating about 0.02 per unit of risk. If you would invest  994.00  in Nuveen California Municipal on December 22, 2024 and sell it today you would earn a total of  7.00  from holding Nuveen California Municipal or generate 0.7% return on investment over 90 days.

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

Nuveen California Municipal  vs.  Franklin Lifesmart 2030

Nuveen California

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen California Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Lifesmart 2030

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart 2030 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuveen California and Franklin Lifesmart

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

The idea behind Nuveen California Municipal and Franklin Lifesmart 2030 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.