Correlation Between Franklin High and Parametric Modity
Can any of the company-specific risk be diversified away by investing in both Franklin High and Parametric Modity 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 Parametric Modity 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 Parametric Modity Strategy, you can compare the effects of market volatilities on Franklin High and Parametric Modity 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 Parametric Modity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Parametric Modity.
Diversification Opportunities for Franklin High and Parametric Modity
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and Parametric is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Parametric Modity Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Modity 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 Parametric Modity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Modity has no effect on the direction of Franklin High i.e., Franklin High and Parametric Modity go up and down completely randomly.
Pair Corralation between Franklin High and Parametric Modity
Assuming the 90 days horizon Franklin High is expected to generate 33.52 times less return on investment than Parametric Modity. But when comparing it to its historical volatility, Franklin High Yield is 2.86 times less risky than Parametric Modity. It trades about 0.02 of its potential returns per unit of risk. Parametric Modity Strategy is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 613.00 in Parametric Modity Strategy on November 3, 2024 and sell it today you would earn a total of 24.00 from holding Parametric Modity Strategy or generate 3.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Yield vs. Parametric Modity Strategy
Performance |
| Timeline |
| Franklin High Yield |
| Parametric Modity |
Franklin High and Parametric Modity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Parametric Modity
The main advantage of trading using opposite Franklin High and Parametric Modity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Parametric Modity 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 Parametric Modity will offset losses from the drop in Parametric Modity's long position.| Franklin High vs. Dodge Cox Stock | Franklin High vs. Guidemark Large Cap | Franklin High vs. Qs Large Cap | Franklin High vs. Tax Managed Large Cap |
| Parametric Modity vs. Clarion Partners Real | Parametric Modity vs. Lazard Global Listed | Parametric Modity vs. Blackrock Commodity Strategies | Parametric Modity vs. Franklin 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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