Correlation Between Chestnut Street and Franklin
Can any of the company-specific risk be diversified away by investing in both Chestnut Street and Franklin 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 Chestnut Street and Franklin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chestnut Street Exchange and Franklin Government Money, you can compare the effects of market volatilities on Chestnut Street and Franklin 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 Chestnut Street with a short position of Franklin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and Franklin.
Diversification Opportunities for Chestnut Street and Franklin
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chestnut and Franklin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Franklin Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government Money and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government Money has no effect on the direction of Chestnut Street i.e., Chestnut Street and Franklin go up and down completely randomly.
Pair Corralation between Chestnut Street and Franklin
If you would invest 113,531 in Chestnut Street Exchange on August 28, 2024 and sell it today you would earn a total of 3,968 from holding Chestnut Street Exchange or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chestnut Street Exchange vs. Franklin Government Money
Performance |
| Timeline |
| Chestnut Street Exchange |
| Franklin Government Money |
Chestnut Street and Franklin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chestnut Street and Franklin
The main advantage of trading using opposite Chestnut Street and Franklin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chestnut Street position performs unexpectedly, Franklin 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 will offset losses from the drop in Franklin's long position.| Chestnut Street vs. Vanguard Total Stock | Chestnut Street vs. Vanguard 500 Index | Chestnut Street vs. Vanguard Total Stock | Chestnut Street vs. Vanguard Total Stock |
| Franklin vs. Aig Government Money | Franklin vs. Blackrock Government Bond | Franklin vs. John Hancock Government | Franklin vs. Dunham Porategovernment Bond |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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