Correlation Between Bank of America and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Franklin Natural Resources, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Franklin Natural.
Diversification Opportunities for Bank of America and Franklin Natural
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and FRANKLIN is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Franklin Natural go up and down completely randomly.
Pair Corralation between Bank of America and Franklin Natural
Considering the 90-day investment horizon Bank of America is expected to generate 2.55 times more return on investment than Franklin Natural. However, Bank of America is 2.55 times more volatile than Franklin Natural Resources. It trades about 0.24 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.28 per unit of risk. If you would invest 4,262 in Bank of America on August 27, 2024 and sell it today you would earn a total of 438.00 from holding Bank of America or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Franklin Natural Resources
Performance |
| Timeline |
| Bank of America |
| Franklin Natural Res |
Bank of America and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Franklin Natural
The main advantage of trading using opposite Bank of America and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
| Franklin Natural vs. Prudential High Yield | Franklin Natural vs. Fidelity Capital Income | Franklin Natural vs. Pioneer High Yield | Franklin Natural vs. Virtus High Yield |
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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