Correlation Between Ford and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Ford and Franklin Mutual 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 Mutual 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 Mutual Global, you can compare the effects of market volatilities on Ford and Franklin Mutual 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 Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Franklin Mutual.
Diversification Opportunities for Ford and Franklin Mutual
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global 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 Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Global has no effect on the direction of Ford i.e., Ford and Franklin Mutual go up and down completely randomly.
Pair Corralation between Ford and Franklin Mutual
Taking into account the 90-day investment horizon Ford is expected to generate 3.55 times less return on investment than Franklin Mutual. In addition to that, Ford is 2.68 times more volatile than Franklin Mutual Global. It trades about 0.04 of its total potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.36 per unit of volatility. If you would invest 2,882 in Franklin Mutual Global on October 26, 2024 and sell it today you would earn a total of 117.00 from holding Franklin Mutual Global or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Franklin Mutual Global
Performance |
| Timeline |
| Ford Motor |
| Franklin Mutual Global |
Ford and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Franklin Mutual
The main advantage of trading using opposite Ford and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Franklin Mutual 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 Mutual will offset losses from the drop in Franklin Mutual's long position.The idea behind Ford Motor and Franklin Mutual Global 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 Mutual vs. T Rowe Price | Franklin Mutual vs. Goldman Sachs Equity | Franklin Mutual vs. Gmo Global Equity | Franklin Mutual vs. Transamerica International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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