Correlation Between Franklin Dynatech and Prudential Total

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

Diversification Opportunities for Franklin Dynatech and Prudential Total

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Franklin and Prudential is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Dynatech Fund and Prudential Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Total Return and Franklin Dynatech 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 Dynatech Fund are associated (or correlated) with Prudential Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Total Return has no effect on the direction of Franklin Dynatech i.e., Franklin Dynatech and Prudential Total go up and down completely randomly.

Pair Corralation between Franklin Dynatech and Prudential Total

Assuming the 90 days horizon Franklin Dynatech Fund is expected to generate 3.72 times more return on investment than Prudential Total. However, Franklin Dynatech is 3.72 times more volatile than Prudential Total Return. It trades about 0.15 of its potential returns per unit of risk. Prudential Total Return is currently generating about 0.08 per unit of risk. If you would invest  17,942  in Franklin Dynatech Fund on August 29, 2024 and sell it today you would earn a total of  785.00  from holding Franklin Dynatech Fund or generate 4.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Franklin Dynatech Fund  vs.  Prudential Total Return

 Performance 
       Timeline  
Franklin Dynatech 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Dynatech Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Dynatech may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Prudential Total Return 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Prudential Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Dynatech and Prudential Total Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Dynatech and Prudential Total

The main advantage of trading using opposite Franklin Dynatech and Prudential Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Dynatech position performs unexpectedly, Prudential Total 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 Prudential Total will offset losses from the drop in Prudential Total's long position.
The idea behind Franklin Dynatech Fund and Prudential Total Return 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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