Correlation Between European Equity and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both European Equity and Franklin Templeton 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 European Equity and Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Equity Closed and Franklin Templeton Limited, you can compare the effects of market volatilities on European Equity and Franklin Templeton 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 European Equity with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Equity and Franklin Templeton.
Diversification Opportunities for European Equity and Franklin Templeton
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between European and Franklin is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding European Equity Closed and Franklin Templeton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton and European Equity 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 European Equity Closed are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton has no effect on the direction of European Equity i.e., European Equity and Franklin Templeton go up and down completely randomly.
Pair Corralation between European Equity and Franklin Templeton
Considering the 90-day investment horizon European Equity Closed is expected to under-perform the Franklin Templeton. In addition to that, European Equity is 1.64 times more volatile than Franklin Templeton Limited. It trades about -0.29 of its total potential returns per unit of risk. Franklin Templeton Limited is currently generating about 0.02 per unit of volatility. If you would invest 655.00 in Franklin Templeton Limited on August 30, 2024 and sell it today you would earn a total of 3.00 from holding Franklin Templeton Limited or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Equity Closed vs. Franklin Templeton Limited
Performance |
| Timeline |
| European Equity Closed |
| Franklin Templeton |
European Equity and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Equity and Franklin Templeton
The main advantage of trading using opposite European Equity and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Equity position performs unexpectedly, Franklin Templeton 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 Templeton will offset losses from the drop in Franklin Templeton's long position.| European Equity vs. XAI Octagon Floating | European Equity vs. MFS Charter Income | European Equity vs. Nuveen New York | European Equity vs. Invesco High Income |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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