Correlation Between Franklin Floating and Nordea 1

Can any of the company-specific risk be diversified away by investing in both Franklin Floating and Nordea 1 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 Nordea 1 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 Nordea 1 , you can compare the effects of market volatilities on Franklin Floating and Nordea 1 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 Nordea 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Floating and Nordea 1.

Diversification Opportunities for Franklin Floating and Nordea 1

0.92

Correlation Coefficient

Franklin Floating  Nordea 1

Almost no diversification

The 3 months correlation between Franklin and Nordea is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Floating Rate and Nordea 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea 1 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 Nordea 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea 1 has no effect on the direction of Franklin Floating i.e., Franklin Floating and Nordea 1 go up and down completely randomly.

Pair Corralation between Franklin Floating and Nordea 1

Assuming the 90 days trading horizon Franklin Floating is expected to generate 3.23 times less return on investment than Nordea 1. But when comparing it to its historical volatility, Franklin Floating Rate is 8.3 times less risky than Nordea 1. It trades about 0.35 of its potential returns per unit of risk. Nordea 1 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  38,076  in Nordea 1 on September 19, 2024 and sell it today you would earn a total of  2,608  from holding Nordea 1 or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Franklin Floating Rate  vs.  Nordea 1

Franklin Floating Rate

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 27 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Nordea 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea 1 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nordea 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Floating and Nordea 1

The main advantage of trading using opposite Franklin Floating and Nordea 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Floating position performs unexpectedly, Nordea 1 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 Nordea 1 will offset losses from the drop in Nordea 1's long position.

The idea behind Franklin Floating Rate and Nordea 1 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.