Correlation Between Franklin LibertyQ and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Franklin LibertyQ and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin LibertyQ Equity and Northern Lights, you can compare the effects of market volatilities on Franklin LibertyQ and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin LibertyQ and Northern Lights.
Diversification Opportunities for Franklin LibertyQ and Northern Lights
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Franklin and Northern is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Franklin LibertyQ Equity and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Equity are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Franklin LibertyQ i.e., Franklin LibertyQ and Northern Lights go up and down completely randomly.
Pair Corralation between Franklin LibertyQ and Northern Lights
Given the investment horizon of 90 days Franklin LibertyQ Equity is expected to generate 0.79 times more return on investment than Northern Lights. However, Franklin LibertyQ Equity is 1.27 times less risky than Northern Lights. It trades about 0.08 of its potential returns per unit of risk. Northern Lights is currently generating about 0.05 per unit of risk. If you would invest 3,771 in Franklin LibertyQ Equity on January 25, 2024 and sell it today you would earn a total of 1,337 from holding Franklin LibertyQ Equity or generate 35.45% 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 Equity vs. Northern Lights
Performance |
| Timeline |
| Franklin LibertyQ Equity |
| Northern Lights |
Franklin LibertyQ and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin LibertyQ and Northern Lights
The main advantage of trading using opposite Franklin LibertyQ and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin LibertyQ position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Franklin LibertyQ vs. SPDR MSCI EAFE | Franklin LibertyQ vs. SPDR MSCI Emerging | Franklin LibertyQ vs. SPDR Russell 1000 | Franklin LibertyQ vs. SPDR Russell 1000 |
| Northern Lights vs. SPDR MSCI EAFE | Northern Lights vs. SPDR MSCI Emerging | Northern Lights vs. SPDR Russell 1000 | Northern Lights vs. SPDR Russell 1000 |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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