Correlation Between Nicholas Fund and Franklin Real

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

By analyzing existing cross correlation between Nicholas Fund Inc and Franklin Real Estate, you can compare the effects of market volatilities on Nicholas Fund and Franklin Real 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 Nicholas Fund with a short position of Franklin Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nicholas Fund and Franklin Real.

Diversification Opportunities for Nicholas Fund and Franklin Real

-0.25

Correlation Coefficient

Nicholas Fund  Franklin Real

Very good diversification

The 3 months correlation between Nicholas and Franklin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Fund Inc and Franklin Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Real Estate and Nicholas Fund 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 Nicholas Fund Inc are associated (or correlated) with Franklin Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Real Estate has no effect on the direction of Nicholas Fund i.e., Nicholas Fund and Franklin Real go up and down completely randomly.

Pair Corralation between Nicholas Fund and Franklin Real

Assuming the 90 days horizon Nicholas Fund Inc is expected to generate 0.84 times more return on investment than Franklin Real. However, Nicholas Fund Inc is 1.19 times less risky than Franklin Real. It trades about 0.14 of its potential returns per unit of risk. Franklin Real Estate is currently generating about -0.07 per unit of risk. If you would invest  9,465  in Nicholas Fund Inc on September 18, 2024 and sell it today you would earn a total of  617.00  from holding Nicholas Fund Inc or generate 6.52% return on investment over 90 days.

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

Nicholas Fund Inc  vs.  Franklin Real Estate

Nicholas Fund

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Fund Inc are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nicholas Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Franklin Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nicholas Fund and Franklin Real

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

The idea behind Nicholas Fund Inc and Franklin Real Estate 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.