Correlation Between Franklin High and Bright Rock
Can any of the company-specific risk be diversified away by investing in both Franklin High and Bright Rock 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 Bright Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Yield and Bright Rock Quality, you can compare the effects of market volatilities on Franklin High and Bright Rock 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 Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Bright Rock.
Diversification Opportunities for Franklin High and Bright Rock
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Bright is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Bright Rock Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Quality 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 Yield are associated (or correlated) with Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Quality has no effect on the direction of Franklin High i.e., Franklin High and Bright Rock go up and down completely randomly.
Pair Corralation between Franklin High and Bright Rock
Assuming the 90 days horizon Franklin High Yield is expected to generate 0.34 times more return on investment than Bright Rock. However, Franklin High Yield is 2.97 times less risky than Bright Rock. It trades about 0.39 of its potential returns per unit of risk. Bright Rock Quality is currently generating about 0.05 per unit of risk. If you would invest 919.00 in Franklin High Yield on September 13, 2024 and sell it today you would earn a total of 11.00 from holding Franklin High Yield or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Yield vs. Bright Rock Quality
Performance |
| Timeline |
| Franklin High Yield |
| Bright Rock Quality |
Franklin High and Bright Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Bright Rock
The main advantage of trading using opposite Franklin High and Bright Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Bright Rock 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 Bright Rock will offset losses from the drop in Bright Rock'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 |
| Bright Rock vs. Alpine High Yield | Bright Rock vs. Fidelity Capital Income | Bright Rock vs. Neuberger Berman Income | Bright Rock vs. Gmo High Yield |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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