Correlation Between Franklin LibertyQ and Nuveen ESG

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

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

Diversification Opportunities for Franklin LibertyQ and Nuveen ESG

0.97

Correlation Coefficient

Franklin LibertyQ  Nuveen ESG

Almost no diversification

The 3 months correlation between Franklin and Nuveen is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Franklin LibertyQ Mid and Nuveen ESG Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Mid and Franklin LibertyQ 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 LibertyQ Mid are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG Mid has no effect on the direction of Franklin LibertyQ i.e., Franklin LibertyQ and Nuveen ESG go up and down completely randomly.

Pair Corralation between Franklin LibertyQ and Nuveen ESG

Given the investment horizon of 90 days Franklin LibertyQ is expected to generate 2.26 times less return on investment than Nuveen ESG. But when comparing it to its historical volatility, Franklin LibertyQ Mid is 1.29 times less risky than Nuveen ESG. It trades about 0.14 of its potential returns per unit of risk. Nuveen ESG Mid Cap is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,338  in Nuveen ESG Mid Cap on August 30, 2024 and sell it today you would earn a total of  729.00  from holding Nuveen ESG Mid Cap or generate 16.8% return on investment over 90 days.

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

Franklin LibertyQ Mid  vs.  Nuveen ESG Mid Cap

Franklin LibertyQ Mid

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin LibertyQ Mid are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Franklin LibertyQ may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Nuveen ESG Mid

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG Mid Cap are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Nuveen ESG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin LibertyQ and Nuveen ESG

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

The idea behind Franklin LibertyQ Mid and Nuveen ESG Mid Cap 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.