Correlation Between Barings Active and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both Barings Active 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 Barings Active and Franklin Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Active Short and Franklin Utilities Fund, you can compare the effects of market volatilities on Barings Active 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 Barings Active with a short position of Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Active and Franklin Utilities.
Diversification Opportunities for Barings Active and Franklin Utilities
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and Franklin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Barings Active Short and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities and Barings Active 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 Barings Active Short 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 Barings Active i.e., Barings Active and Franklin Utilities go up and down completely randomly.
Pair Corralation between Barings Active and Franklin Utilities
Assuming the 90 days horizon Barings Active is expected to generate 40.28 times less return on investment than Franklin Utilities. But when comparing it to its historical volatility, Barings Active Short is 8.2 times less risky than Franklin Utilities. It trades about 0.04 of its potential returns per unit of risk. Franklin Utilities Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,456 in Franklin Utilities Fund on August 26, 2024 and sell it today you would earn a total of 108.00 from holding Franklin Utilities Fund or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barings Active Short vs. Franklin Utilities Fund
Performance |
| Timeline |
| Barings Active Short |
| Franklin Utilities |
Barings Active and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Active and Franklin Utilities
The main advantage of trading using opposite Barings Active and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Active 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.| Barings Active vs. Barings Emerging Markets | Barings Active vs. Barings Emerging Markets | Barings Active vs. Barings Global Floating | Barings Active vs. Barings Global Floating |
| Franklin Utilities vs. Fundvantage Trust | Franklin Utilities vs. Ultra Short Term Fixed | Franklin Utilities vs. Limited Term Tax | Franklin Utilities vs. Barings Active Short |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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