Correlation Between Franklin High and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Franklin High and Metropolitan West 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 High and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Income and Metropolitan West Total, you can compare the effects of market volatilities on Franklin High and Metropolitan West 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 High with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Metropolitan West.
Diversification Opportunities for Franklin High and Metropolitan West
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Franklin and Metropolitan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Income and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total and Franklin High 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 High Income are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Total has no effect on the direction of Franklin High i.e., Franklin High and Metropolitan West go up and down completely randomly.
Pair Corralation between Franklin High and Metropolitan West
Assuming the 90 days horizon Franklin High is expected to generate 78.0 times less return on investment than Metropolitan West. But when comparing it to its historical volatility, Franklin High Income is 1.7 times less risky than Metropolitan West. It trades about 0.0 of its potential returns per unit of risk. Metropolitan West Total is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 846.00 in Metropolitan West Total on September 1, 2024 and sell it today you would earn a total of 4.00 from holding Metropolitan West Total or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Income vs. Metropolitan West Total
Performance |
| Timeline |
| Franklin High Income |
| Metropolitan West Total |
Franklin High and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Metropolitan West
The main advantage of trading using opposite Franklin High and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Franklin High vs. Franklin Mutual Beacon | Franklin High vs. Templeton Developing Markets | Franklin High vs. Franklin Mutual Global | Franklin High vs. Franklin Mutual Global |
| Metropolitan West vs. Strategic Allocation Aggressive | Metropolitan West vs. Franklin High Income | Metropolitan West vs. Lgm Risk Managed | Metropolitan West vs. Federated Institutional High |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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