Correlation Between Franklin Liberty and SPDR Nuveen

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

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

Diversification Opportunities for Franklin Liberty and SPDR Nuveen

0.9

Correlation Coefficient

Franklin Liberty  SPDR Nuveen

Almost no diversification

The 3 months correlation between Franklin and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Intermediate and SPDR Nuveen Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Nuveen Bloomberg and Franklin Liberty 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 Franklin Liberty Intermediate are associated (or correlated) with SPDR Nuveen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Nuveen Bloomberg has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and SPDR Nuveen go up and down completely randomly.

Pair Corralation between Franklin Liberty and SPDR Nuveen

Given the investment horizon of 90 days Franklin Liberty Intermediate is expected to generate 0.91 times more return on investment than SPDR Nuveen. However, Franklin Liberty Intermediate is 1.1 times less risky than SPDR Nuveen. It trades about 0.1 of its potential returns per unit of risk. SPDR Nuveen Bloomberg is currently generating about 0.09 per unit of risk. If you would invest  2,456  in Franklin Liberty Intermediate on September 2, 2024 and sell it today you would earn a total of  50.00  from holding Franklin Liberty Intermediate or generate 2.04% return on investment over 90 days.

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

Franklin Liberty Intermediate  vs.  SPDR Nuveen Bloomberg

Franklin Liberty Int

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Intermediate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

SPDR Nuveen Bloomberg

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Nuveen Bloomberg are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, SPDR Nuveen is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Liberty and SPDR Nuveen

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

The idea behind Franklin Liberty Intermediate and SPDR Nuveen Bloomberg 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.