Correlation Between American Express and Franklin Resources
Can any of the company-specific risk be diversified away by investing in both American Express and Franklin Resources 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 Express and Franklin Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Franklin Resources, you can compare the effects of market volatilities on American Express and Franklin Resources 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 Express with a short position of Franklin Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Franklin Resources.
Diversification Opportunities for American Express and Franklin Resources
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Franklin is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Franklin Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Resources and American Express 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 Express are associated (or correlated) with Franklin Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Resources has no effect on the direction of American Express i.e., American Express and Franklin Resources go up and down completely randomly.
Pair Corralation between American Express and Franklin Resources
Considering the 90-day investment horizon American Express is expected to generate 1.08 times more return on investment than Franklin Resources. However, American Express is 1.08 times more volatile than Franklin Resources. It trades about 0.3 of its potential returns per unit of risk. Franklin Resources is currently generating about 0.25 per unit of risk. If you would invest 27,008 in American Express on September 1, 2024 and sell it today you would earn a total of 3,460 from holding American Express or generate 12.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Franklin Resources
Performance |
| Timeline |
| American Express |
| Franklin Resources |
American Express and Franklin Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Franklin Resources
The main advantage of trading using opposite American Express and Franklin Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Franklin Resources 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 Resources will offset losses from the drop in Franklin Resources' long position.| American Express vs. 360 Finance | American Express vs. Atlanticus Holdings | American Express vs. Qudian Inc | American Express vs. Enova International |
| Franklin Resources vs. BlackRock | Franklin Resources vs. Main Street Capital | Franklin Resources vs. Blackstone Group | Franklin Resources vs. Ares Capital |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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