Correlation Between Franklin BSP and Extendicare

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Can any of the company-specific risk be diversified away by investing in both Franklin BSP and Extendicare 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 BSP and Extendicare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin BSP Realty and Extendicare, you can compare the effects of market volatilities on Franklin BSP and Extendicare 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 BSP with a short position of Extendicare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin BSP and Extendicare.

Diversification Opportunities for Franklin BSP and Extendicare

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Franklin and Extendicare is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Franklin BSP Realty and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and Franklin BSP 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 BSP Realty are associated (or correlated) with Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of Franklin BSP i.e., Franklin BSP and Extendicare go up and down completely randomly.

Pair Corralation between Franklin BSP and Extendicare

Assuming the 90 days trading horizon Franklin BSP is expected to generate 1.1 times less return on investment than Extendicare. In addition to that, Franklin BSP is 1.09 times more volatile than Extendicare. It trades about 0.07 of its total potential returns per unit of risk. Extendicare is currently generating about 0.09 per unit of volatility. If you would invest  484.00  in Extendicare on August 30, 2024 and sell it today you would earn a total of  16.00  from holding Extendicare or generate 3.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy8.47%
ValuesDaily Returns

Franklin BSP Realty  vs.  Extendicare

 Performance 
       Timeline  
Franklin BSP Realty 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Franklin BSP Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Franklin BSP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Extendicare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Extendicare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Extendicare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin BSP and Extendicare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin BSP and Extendicare

The main advantage of trading using opposite Franklin BSP and Extendicare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin BSP position performs unexpectedly, Extendicare 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 Extendicare will offset losses from the drop in Extendicare's long position.
The idea behind Franklin BSP Realty and Extendicare 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.
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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