Correlation Between Northern Large and Franklin Equity
Can any of the company-specific risk be diversified away by investing in both Northern Large and Franklin Equity 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 Northern Large and Franklin Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Large Cap and Franklin Equity Income, you can compare the effects of market volatilities on Northern Large and Franklin Equity 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 Northern Large with a short position of Franklin Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Franklin Equity.
Diversification Opportunities for Northern Large and Franklin Equity
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Franklin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Franklin Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Equity Income and Northern Large 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 Northern Large Cap are associated (or correlated) with Franklin Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Equity Income has no effect on the direction of Northern Large i.e., Northern Large and Franklin Equity go up and down completely randomly.
Pair Corralation between Northern Large and Franklin Equity
Assuming the 90 days horizon Northern Large is expected to generate 2.35 times less return on investment than Franklin Equity. In addition to that, Northern Large is 1.05 times more volatile than Franklin Equity Income. It trades about 0.08 of its total potential returns per unit of risk. Franklin Equity Income is currently generating about 0.21 per unit of volatility. If you would invest 3,017 in Franklin Equity Income on February 27, 2024 and sell it today you would earn a total of 243.00 from holding Franklin Equity Income or generate 8.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Northern Large Cap vs. Franklin Equity Income
Performance |
Timeline |
Northern Large Cap |
Franklin Equity Income |
Northern Large and Franklin Equity Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northern Large and Franklin Equity
The main advantage of trading using opposite Northern Large and Franklin Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Franklin Equity 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 Franklin Equity will offset losses from the drop in Franklin Equity's long position.Northern Large vs. Dodge Cox Stock | Northern Large vs. American Funds American | Northern Large vs. American Funds American | Northern Large vs. American Mutual Fund |
Franklin Equity vs. Dodge Cox Stock | Franklin Equity vs. American Funds American | Franklin Equity vs. American Funds American | Franklin Equity vs. American Mutual Fund |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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