Correlation Between Ford and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Franklin Utilities 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 Utilities Fund, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Franklin Utilities.
Diversification Opportunities for Ford and Franklin Utilities
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Franklin is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities 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 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 Ford i.e., Ford and Franklin Utilities go up and down completely randomly.
Pair Corralation between Ford and Franklin Utilities
Taking into account the 90-day investment horizon Ford is expected to generate 1.59 times less return on investment than Franklin Utilities. In addition to that, Ford is 2.35 times more volatile than Franklin Utilities Fund. It trades about 0.03 of its total potential returns per unit of risk. Franklin Utilities Fund is currently generating about 0.12 per unit of volatility. If you would invest 1,922 in Franklin Utilities Fund on August 25, 2024 and sell it today you would earn a total of 651.00 from holding Franklin Utilities Fund or generate 33.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Franklin Utilities Fund
Performance |
| Timeline |
| Ford Motor |
| Franklin Utilities |
Ford and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Franklin Utilities
The main advantage of trading using opposite Ford and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Franklin Utilities 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 Utilities vs. Angel Oak Ultrashort | Franklin Utilities vs. Calvert Short Duration | Franklin Utilities vs. Locorr Longshort Modities | Franklin Utilities vs. Aqr Long Short Equity |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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