Correlation Between Franklin Emerging and Health Care
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and Health Care 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 Emerging and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Emerging Market and Health Care Ultrasector, you can compare the effects of market volatilities on Franklin Emerging and Health Care 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 Emerging with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Health Care.
Diversification Opportunities for Franklin Emerging and Health Care
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FRANKLIN and Health is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector and Franklin Emerging 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 Emerging Market are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Ultrasector has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Health Care go up and down completely randomly.
Pair Corralation between Franklin Emerging and Health Care
Assuming the 90 days horizon Franklin Emerging Market is expected to generate 0.18 times more return on investment than Health Care. However, Franklin Emerging Market is 5.57 times less risky than Health Care. It trades about 0.18 of its potential returns per unit of risk. Health Care Ultrasector is currently generating about 0.03 per unit of risk. If you would invest 1,164 in Franklin Emerging Market on December 3, 2024 and sell it today you would earn a total of 27.00 from holding Franklin Emerging Market or generate 2.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Emerging Market vs. Health Care Ultrasector
Performance |
| Timeline |
| Franklin Emerging Market |
| Health Care Ultrasector |
Franklin Emerging and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and Health Care
The main advantage of trading using opposite Franklin Emerging and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Franklin Emerging vs. Dodge Cox Stock | ||
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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