Correlation Between Columbia Dividend and Franklin Convertible
Can any of the company-specific risk be diversified away by investing in both Columbia Dividend and Franklin Convertible 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 Columbia Dividend and Franklin Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Dividend Income and Franklin Vertible Securities, you can compare the effects of market volatilities on Columbia Dividend and Franklin Convertible 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 Columbia Dividend with a short position of Franklin Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Dividend and Franklin Convertible.
Diversification Opportunities for Columbia Dividend and Franklin Convertible
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Columbia and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Dividend Income and Franklin Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Convertible and Columbia Dividend 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 Columbia Dividend Income are associated (or correlated) with Franklin Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Convertible has no effect on the direction of Columbia Dividend i.e., Columbia Dividend and Franklin Convertible go up and down completely randomly.
Pair Corralation between Columbia Dividend and Franklin Convertible
Assuming the 90 days horizon Columbia Dividend is expected to generate 1.64 times less return on investment than Franklin Convertible. In addition to that, Columbia Dividend is 1.11 times more volatile than Franklin Vertible Securities. It trades about 0.25 of its total potential returns per unit of risk. Franklin Vertible Securities is currently generating about 0.45 per unit of volatility. If you would invest 2,300 in Franklin Vertible Securities on August 29, 2024 and sell it today you would earn a total of 141.00 from holding Franklin Vertible Securities or generate 6.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Columbia Dividend Income vs. Franklin Vertible Securities
Performance |
| Timeline |
| Columbia Dividend Income |
| Franklin Convertible |
Columbia Dividend and Franklin Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Dividend and Franklin Convertible
The main advantage of trading using opposite Columbia Dividend and Franklin Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Dividend position performs unexpectedly, Franklin Convertible 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 Convertible will offset losses from the drop in Franklin Convertible's long position.The idea behind Columbia Dividend Income and Franklin Vertible Securities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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