Correlation Between Nuveen ESG and Franklin LibertyQ

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

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

Diversification Opportunities for Nuveen ESG and Franklin LibertyQ

0.98

Correlation Coefficient

Nuveen ESG  Franklin LibertyQ

Almost no diversification

The 3 months correlation between Nuveen and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG Mid Cap and Franklin LibertyQ Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Mid and Nuveen ESG 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 ESG Mid Cap are associated (or correlated) with Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Mid has no effect on the direction of Nuveen ESG i.e., Nuveen ESG and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between Nuveen ESG and Franklin LibertyQ

Given the investment horizon of 90 days Nuveen ESG Mid Cap is expected to generate 0.94 times more return on investment than Franklin LibertyQ. However, Nuveen ESG Mid Cap is 1.06 times less risky than Franklin LibertyQ. It trades about -0.04 of its potential returns per unit of risk. Franklin LibertyQ Mid is currently generating about -0.05 per unit of risk. If you would invest  3,472  in Nuveen ESG Mid Cap on December 29, 2024 and sell it today you would lose (78.00) from holding Nuveen ESG Mid Cap or give up 2.25% of portfolio value over 90 days.

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

Nuveen ESG Mid Cap  vs.  Franklin LibertyQ Mid

Nuveen ESG Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen ESG Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Nuveen ESG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Franklin LibertyQ Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin LibertyQ Mid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Franklin LibertyQ is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nuveen ESG and Franklin LibertyQ

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

The idea behind Nuveen ESG Mid Cap and Franklin LibertyQ Mid 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..