Correlation Between Constellation Energy and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both Constellation Energy 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 Constellation Energy and Franklin Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Energy Corp and Franklin Utilities Fund, you can compare the effects of market volatilities on Constellation Energy 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 Constellation Energy with a short position of Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Energy and Franklin Utilities.
Diversification Opportunities for Constellation Energy and Franklin Utilities
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Constellation and Franklin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Energy Corp and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities and Constellation Energy 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 Constellation Energy Corp 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 Constellation Energy i.e., Constellation Energy and Franklin Utilities go up and down completely randomly.
Pair Corralation between Constellation Energy and Franklin Utilities
Considering the 90-day investment horizon Constellation Energy Corp is expected to under-perform the Franklin Utilities. In addition to that, Constellation Energy is 4.2 times more volatile than Franklin Utilities Fund. It trades about -0.01 of its total potential returns per unit of risk. Franklin Utilities Fund is currently generating about 0.28 per unit of volatility. If you would invest 2,441 in Franklin Utilities Fund on September 1, 2024 and sell it today you would earn a total of 142.00 from holding Franklin Utilities Fund or generate 5.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Energy Corp vs. Franklin Utilities Fund
Performance |
| Timeline |
| Constellation Energy Corp |
| Franklin Utilities |
Constellation Energy and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Energy and Franklin Utilities
The main advantage of trading using opposite Constellation Energy and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Energy 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.| Constellation Energy vs. Atlantica Sustainable Infrastructure | Constellation Energy vs. Clearway Energy | Constellation Energy vs. Brookfield Renewable Corp | Constellation Energy vs. Nextera Energy Partners |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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