Correlation Between Ford and Franklin Income
Can any of the company-specific risk be diversified away by investing in both Ford and Franklin Income 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 Ford and Franklin Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Franklin Income Fund, you can compare the effects of market volatilities on Ford and Franklin Income 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 Ford with a short position of Franklin Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Franklin Income.
Diversification Opportunities for Ford and Franklin Income
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ford and Franklin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Franklin Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Income and Ford 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 Ford Motor are associated (or correlated) with Franklin Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Income has no effect on the direction of Ford i.e., Ford and Franklin Income go up and down completely randomly.
Pair Corralation between Ford and Franklin Income
Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.99 times more return on investment than Franklin Income. However, Ford is 6.99 times more volatile than Franklin Income Fund. It trades about 0.05 of its potential returns per unit of risk. Franklin Income Fund is currently generating about -0.03 per unit of risk. If you would invest 1,072 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 46.00 from holding Ford Motor or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Franklin Income Fund
Performance |
| Timeline |
| Ford Motor |
| Franklin Income |
Ford and Franklin Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Franklin Income
The main advantage of trading using opposite Ford and Franklin Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Franklin Income 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 Income will offset losses from the drop in Franklin Income's long position.The idea behind Ford Motor and Franklin Income Fund 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.| Franklin Income vs. Franklin Mutual Beacon | Franklin Income vs. Templeton Developing Markets | Franklin Income vs. Franklin Mutual Global | Franklin Income 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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