Correlation Between Nomura Real and Franklin Mutual

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

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

Diversification Opportunities for Nomura Real and Franklin Mutual

0.44

Correlation Coefficient

Nomura Real  Franklin Mutual

Very weak diversification

The 3 months correlation between Nomura and Franklin is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nomura Real Estate and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global and Nomura Real 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 Nomura Real Estate are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Global has no effect on the direction of Nomura Real i.e., Nomura Real and Franklin Mutual go up and down completely randomly.

Pair Corralation between Nomura Real and Franklin Mutual

Assuming the 90 days horizon Nomura Real Estate is expected to generate 4.99 times more return on investment than Franklin Mutual. However, Nomura Real is 4.99 times more volatile than Franklin Mutual Global. It trades about 0.04 of its potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.01 per unit of risk. If you would invest  55,965  in Nomura Real Estate on October 12, 2024 and sell it today you would earn a total of  44,870  from holding Nomura Real Estate or generate 80.18% return on investment over 90 days.

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

Nomura Real Estate  vs.  Franklin Mutual Global

Nomura Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomura Real Estate has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Nomura Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin Mutual Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Nomura Real and Franklin Mutual

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

The idea behind Nomura Real Estate and Franklin Mutual Global 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.