Correlation Between NXG NextGen and Franklin Templeton

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Can any of the company-specific risk be diversified away by investing in both NXG NextGen and Franklin Templeton 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 NXG NextGen and Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NXG NextGen Infrastructure and Franklin Templeton Limited, you can compare the effects of market volatilities on NXG NextGen and Franklin Templeton 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 NXG NextGen with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXG NextGen and Franklin Templeton.

Diversification Opportunities for NXG NextGen and Franklin Templeton

0.25
  Correlation Coefficient

Modest diversification

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

Pair Corralation between NXG NextGen and Franklin Templeton

Considering the 90-day investment horizon NXG NextGen Infrastructure is expected to generate 3.34 times more return on investment than Franklin Templeton. However, NXG NextGen is 3.34 times more volatile than Franklin Templeton Limited. It trades about 0.05 of its potential returns per unit of risk. Franklin Templeton Limited is currently generating about 0.08 per unit of risk. If you would invest  3,100  in NXG NextGen Infrastructure on September 6, 2024 and sell it today you would earn a total of  1,606  from holding NXG NextGen Infrastructure or generate 51.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NXG NextGen Infrastructure  vs.  Franklin Templeton Limited

 Performance 
       Timeline  
NXG NextGen Infrastr 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen reported solid returns over the last few months and may actually be approaching a breakup point.
Franklin Templeton 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Franklin Templeton is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NXG NextGen and Franklin Templeton Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NXG NextGen and Franklin Templeton

The main advantage of trading using opposite NXG NextGen and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXG NextGen position performs unexpectedly, Franklin Templeton 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 Templeton will offset losses from the drop in Franklin Templeton's long position.
The idea behind NXG NextGen Infrastructure and Franklin Templeton Limited 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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