Correlation Between World Energy and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both World Energy and Franklin Natural 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 World Energy and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Franklin Natural Resources, you can compare the effects of market volatilities on World Energy and Franklin Natural 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 World Energy with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Franklin Natural.
Diversification Opportunities for World Energy and Franklin Natural
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between World and Franklin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and World Energy 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 World Energy Fund are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of World Energy i.e., World Energy and Franklin Natural go up and down completely randomly.
Pair Corralation between World Energy and Franklin Natural
Assuming the 90 days horizon World Energy Fund is expected to generate 1.14 times more return on investment than Franklin Natural. However, World Energy is 1.14 times more volatile than Franklin Natural Resources. It trades about 0.03 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.02 per unit of risk. If you would invest 1,251 in World Energy Fund on October 30, 2024 and sell it today you would earn a total of 232.00 from holding World Energy Fund or generate 18.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Franklin Natural Resources
Performance |
| Timeline |
| World Energy |
| Franklin Natural Res |
World Energy and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Franklin Natural
The main advantage of trading using opposite World Energy and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Franklin Natural 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 Natural will offset losses from the drop in Franklin Natural's long position.| World Energy vs. Rational Defensive Growth | World Energy vs. Eip Growth And | World Energy vs. Upright Growth Income | World Energy vs. L Abbett Growth |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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