Correlation Between Franklin Floating and Storebrand Global

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

Diversification Opportunities for Franklin Floating and Storebrand Global

0.74

Correlation Coefficient

Franklin Floating  Storebrand Global

Poor diversification

The 3 months correlation between Franklin and Storebrand is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Floating Rate and Storebrand Global Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storebrand Global 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 Storebrand Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storebrand Global has no effect on the direction of Franklin Floating i.e., Franklin Floating and Storebrand Global go up and down completely randomly.

Pair Corralation between Franklin Floating and Storebrand Global

Assuming the 90 days trading horizon Franklin Floating is expected to generate 1.72 times less return on investment than Storebrand Global. But when comparing it to its historical volatility, Franklin Floating Rate is 7.67 times less risky than Storebrand Global. It trades about 0.37 of its potential returns per unit of risk. Storebrand Global Solutions is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  229,091  in Storebrand Global Solutions on September 18, 2024 and sell it today you would earn a total of  8,343  from holding Storebrand Global Solutions or generate 3.64% return on investment over 90 days.

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

Franklin Floating Rate  vs.  Storebrand Global Solutions

Franklin Floating Rate

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 29 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Storebrand Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand Global Solutions are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Storebrand Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Franklin Floating and Storebrand Global

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

The idea behind Franklin Floating Rate and Storebrand Global Solutions 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.