Correlation Between Franklin and World Energy
Can any of the company-specific risk be diversified away by investing in both Franklin and World Energy 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 Franklin and World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin K2 Alternative and World Energy Fund, you can compare the effects of market volatilities on Franklin and World Energy 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 Franklin with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and World Energy.
Diversification Opportunities for Franklin and World Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and World is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Franklin K2 Alternative and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Franklin 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 Franklin K2 Alternative are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Franklin i.e., Franklin and World Energy go up and down completely randomly.
Pair Corralation between Franklin and World Energy
Assuming the 90 days horizon Franklin is expected to generate 2.85 times less return on investment than World Energy. But when comparing it to its historical volatility, Franklin K2 Alternative is 5.85 times less risky than World Energy. It trades about 0.16 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,148 in World Energy Fund on September 2, 2024 and sell it today you would earn a total of 398.00 from holding World Energy Fund or generate 34.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin K2 Alternative vs. World Energy Fund
Performance |
| Timeline |
| Franklin K2 Alternative |
| World Energy |
Franklin and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and World Energy
The main advantage of trading using opposite Franklin and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| Franklin vs. Goldman Sachs Clean | Franklin vs. James Balanced Golden | Franklin vs. Global Gold Fund | Franklin vs. International Investors Gold |
| World Energy vs. Huber Capital Equity | World Energy vs. Us Vector Equity | World Energy vs. Scharf Fund Retail | World Energy vs. Ultra Short Fixed Income |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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