Correlation Between Dow Jones and Franklin Founding
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Franklin Founding 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 Dow Jones and Franklin Founding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Franklin Founding Funds, you can compare the effects of market volatilities on Dow Jones and Franklin Founding 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 Dow Jones with a short position of Franklin Founding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Franklin Founding.
Diversification Opportunities for Dow Jones and Franklin Founding
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Franklin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Franklin Founding Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Founding Funds and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Franklin Founding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Founding Funds has no effect on the direction of Dow Jones i.e., Dow Jones and Franklin Founding go up and down completely randomly.
Pair Corralation between Dow Jones and Franklin Founding
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.39 times more return on investment than Franklin Founding. However, Dow Jones is 1.39 times more volatile than Franklin Founding Funds. It trades about 0.09 of its potential returns per unit of risk. Franklin Founding Funds is currently generating about 0.11 per unit of risk. If you would invest 3,320,222 in Dow Jones Industrial on September 5, 2024 and sell it today you would earn a total of 1,150,331 from holding Dow Jones Industrial or generate 34.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Franklin Founding Funds
Performance |
| Timeline |
Dow Jones and Franklin Founding Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Franklin Founding Funds
Pair trading matchups for Franklin Founding
Pair Trading with Dow Jones and Franklin Founding
The main advantage of trading using opposite Dow Jones and Franklin Founding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Franklin Founding 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 Founding will offset losses from the drop in Franklin Founding's long position.| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
| Franklin Founding vs. Franklin Mutual Beacon | Franklin Founding vs. Templeton Developing Markets | Franklin Founding vs. Franklin Mutual Global | Franklin Founding vs. Franklin Mutual Global |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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