Correlation Between Franklin Credit and APACHE

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Can any of the company-specific risk be diversified away by investing in both Franklin Credit and APACHE 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 Credit and APACHE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Credit Management and APACHE P 425, you can compare the effects of market volatilities on Franklin Credit and APACHE 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 Credit with a short position of APACHE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Credit and APACHE.

Diversification Opportunities for Franklin Credit and APACHE

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Franklin and APACHE is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Credit Management and APACHE P 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APACHE P 425 and Franklin Credit 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 Credit Management are associated (or correlated) with APACHE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APACHE P 425 has no effect on the direction of Franklin Credit i.e., Franklin Credit and APACHE go up and down completely randomly.

Pair Corralation between Franklin Credit and APACHE

Given the investment horizon of 90 days Franklin Credit Management is expected to under-perform the APACHE. In addition to that, Franklin Credit is 1.69 times more volatile than APACHE P 425. It trades about -0.11 of its total potential returns per unit of risk. APACHE P 425 is currently generating about -0.08 per unit of volatility. If you would invest  7,431  in APACHE P 425 on September 1, 2024 and sell it today you would lose (428.00) from holding APACHE P 425 or give up 5.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy85.71%
ValuesDaily Returns

Franklin Credit Management  vs.  APACHE P 425

 Performance 
       Timeline  
Franklin Credit Mana 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Credit Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Franklin Credit displayed solid returns over the last few months and may actually be approaching a breakup point.
APACHE P 425 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days APACHE P 425 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APACHE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Franklin Credit and APACHE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Credit and APACHE

The main advantage of trading using opposite Franklin Credit and APACHE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Credit position performs unexpectedly, APACHE 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 APACHE will offset losses from the drop in APACHE's long position.
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The idea behind Franklin Credit Management and APACHE P 425 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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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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