Correlation Between Absolute Convertible and Franklin Founding
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Franklin Founding 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 Absolute Convertible and Franklin Founding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Franklin Founding Funds, you can compare the effects of market volatilities on Absolute Convertible and Franklin Founding 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 Absolute Convertible with a short position of Franklin Founding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Franklin Founding.
Diversification Opportunities for Absolute Convertible and Franklin Founding
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Franklin Founding Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Founding Funds and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Franklin Founding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Founding Funds has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Franklin Founding go up and down completely randomly.
Pair Corralation between Absolute Convertible and Franklin Founding
Assuming the 90 days horizon Absolute Convertible is expected to generate 2.17 times less return on investment than Franklin Founding. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 7.84 times less risky than Franklin Founding. It trades about 0.37 of its potential returns per unit of risk. Franklin Founding Funds is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,235 in Franklin Founding Funds on September 13, 2024 and sell it today you would earn a total of 353.00 from holding Franklin Founding Funds or generate 28.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Franklin Founding Funds
Performance |
| Timeline |
| Absolute Convertible |
| Franklin Founding Funds |
Absolute Convertible and Franklin Founding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Franklin Founding
The main advantage of trading using opposite Absolute Convertible and Franklin Founding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Franklin Founding 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 Founding will offset losses from the drop in Franklin Founding's long position.| Absolute Convertible vs. Advent Claymore Convertible | Absolute Convertible vs. Fidelity Sai Convertible | Absolute Convertible vs. Virtus Convertible | Absolute Convertible vs. Putnam Convertible Incm Gwth |
| Franklin Founding vs. Fidelity Sai Convertible | Franklin Founding vs. Gabelli Convertible And | Franklin Founding vs. Putnam Convertible Incm Gwth | Franklin Founding vs. Absolute Convertible Arbitrage |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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