Correlation Between American States and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both American States and Franklin Utilities 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 American States and Franklin Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American States Water and Franklin Utilities Fund, you can compare the effects of market volatilities on American States and Franklin Utilities 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 American States with a short position of Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and Franklin Utilities.
Diversification Opportunities for American States and Franklin Utilities
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities and American States 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 American States Water are associated (or correlated) with Franklin Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Utilities has no effect on the direction of American States i.e., American States and Franklin Utilities go up and down completely randomly.
Pair Corralation between American States and Franklin Utilities
Considering the 90-day investment horizon American States Water is expected to under-perform the Franklin Utilities. In addition to that, American States is 1.31 times more volatile than Franklin Utilities Fund. It trades about -0.02 of its total potential returns per unit of risk. Franklin Utilities Fund is currently generating about 0.03 per unit of volatility. If you would invest 2,067 in Franklin Utilities Fund on November 27, 2024 and sell it today you would earn a total of 268.00 from holding Franklin Utilities Fund or generate 12.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American States Water vs. Franklin Utilities Fund
Performance |
| Timeline |
| American States Water |
| Franklin Utilities |
American States and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American States and Franklin Utilities
The main advantage of trading using opposite American States and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American States position performs unexpectedly, Franklin Utilities 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 Utilities will offset losses from the drop in Franklin Utilities' long position.| American States vs. Middlesex Water | American States vs. SJW Group Common | American States vs. The York Water | American States vs. Artesian Resources |
| Franklin Utilities vs. Franklin Mutual Beacon | Franklin Utilities vs. Franklin Mutual Global | Franklin Utilities vs. Franklin Mutual Global | Franklin Utilities vs. Templeton Foreign 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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