Correlation Between Northern Small and Franklin Gold

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

By analyzing existing cross correlation between Northern Small Cap and Franklin Gold Precious, you can compare the effects of market volatilities on Northern Small and Franklin Gold 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 Northern Small with a short position of Franklin Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Franklin Gold.

Diversification Opportunities for Northern Small and Franklin Gold

-0.3

Correlation Coefficient

Northern Small  Franklin Gold

Very good diversification

The 3 months correlation between Northern and Franklin is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Franklin Gold Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Gold Precious and Northern Small 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 Northern Small Cap are associated (or correlated) with Franklin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Gold Precious has no effect on the direction of Northern Small i.e., Northern Small and Franklin Gold go up and down completely randomly.

Pair Corralation between Northern Small and Franklin Gold

Assuming the 90 days horizon Northern Small Cap is expected to generate 0.74 times more return on investment than Franklin Gold. However, Northern Small Cap is 1.34 times less risky than Franklin Gold. It trades about 0.15 of its potential returns per unit of risk. Franklin Gold Precious is currently generating about 0.01 per unit of risk. If you would invest  1,413  in Northern Small Cap on September 12, 2024 and sell it today you would earn a total of  173.00  from holding Northern Small Cap or generate 12.24% return on investment over 90 days.

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

Northern Small Cap  vs.  Franklin Gold Precious

Northern Small Cap

Risk-Adjusted Performance

11 of 100

Good

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

Franklin Gold Precious

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Gold Precious 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 Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northern Small and Franklin Gold

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

The idea behind Northern Small Cap and Franklin Gold Precious 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.