Correlation Between Nuveen Small and Franklin Mutual

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

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

Diversification Opportunities for Nuveen Small and Franklin Mutual

0.21

Correlation Coefficient

Nuveen Small  Franklin Mutual

Modest diversification

The 3 months correlation between Nuveen and Franklin is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Small Cap 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 Nuveen 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 Nuveen Small Cap 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 Nuveen Small i.e., Nuveen Small and Franklin Mutual go up and down completely randomly.

Pair Corralation between Nuveen Small and Franklin Mutual

Assuming the 90 days horizon Nuveen Small Cap is expected to generate 2.01 times more return on investment than Franklin Mutual. However, Nuveen Small is 2.01 times more volatile than Franklin Mutual Global. It trades about 0.19 of its potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.03 per unit of risk. If you would invest  1,012  in Nuveen Small Cap on September 4, 2024 and sell it today you would earn a total of  157.00  from holding Nuveen Small Cap or generate 15.51% return on investment over 90 days.

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

Nuveen Small Cap  vs.  Franklin Mutual Global

Nuveen Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nuveen Small showed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Mutual Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuveen Small and Franklin Mutual

The main advantage of trading using opposite Nuveen Small and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Small 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 Nuveen Small Cap 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.