Correlation Between Franklin Floating and KLP AksjeNorge

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

By analyzing existing cross correlation between Franklin Floating Rate and KLP AksjeNorge Indeks, you can compare the effects of market volatilities on Franklin Floating and KLP AksjeNorge 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 Floating with a short position of KLP AksjeNorge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Floating and KLP AksjeNorge.

Diversification Opportunities for Franklin Floating and KLP AksjeNorge

0.69

Correlation Coefficient

Franklin Floating  KLP AksjeNorge

Poor diversification

The 3 months correlation between Franklin and KLP is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Floating Rate and KLP AksjeNorge Indeks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLP AksjeNorge Indeks and Franklin Floating 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 Floating Rate are associated (or correlated) with KLP AksjeNorge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLP AksjeNorge Indeks has no effect on the direction of Franklin Floating i.e., Franklin Floating and KLP AksjeNorge go up and down completely randomly.

Pair Corralation between Franklin Floating and KLP AksjeNorge

Assuming the 90 days trading horizon Franklin Floating is expected to generate 1.18 times less return on investment than KLP AksjeNorge. But when comparing it to its historical volatility, Franklin Floating Rate is 7.5 times less risky than KLP AksjeNorge. It trades about 0.39 of its potential returns per unit of risk. KLP AksjeNorge Indeks is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  374,159  in KLP AksjeNorge Indeks on September 19, 2024 and sell it today you would earn a total of  9,250  from holding KLP AksjeNorge Indeks or generate 2.47% return on investment over 90 days.

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

Franklin Floating Rate  vs.  KLP AksjeNorge Indeks

Franklin Floating Rate

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental indicators, Franklin Floating is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

KLP AksjeNorge Indeks

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KLP AksjeNorge Indeks are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical indicators, KLP AksjeNorge is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Franklin Floating and KLP AksjeNorge

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

The idea behind Franklin Floating Rate and KLP AksjeNorge Indeks 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.