Correlation Between Franklin High and Gotham Defensive
Can any of the company-specific risk be diversified away by investing in both Franklin High and Gotham Defensive 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 Gotham Defensive 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 Gotham Defensive Long, you can compare the effects of market volatilities on Franklin High and Gotham Defensive 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 Gotham Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Gotham Defensive.
Diversification Opportunities for Franklin High and Gotham Defensive
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and Gotham is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Gotham Defensive Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Defensive Long 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 Gotham Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Defensive Long has no effect on the direction of Franklin High i.e., Franklin High and Gotham Defensive go up and down completely randomly.
Pair Corralation between Franklin High and Gotham Defensive
Assuming the 90 days horizon Franklin High is expected to generate 1.33 times less return on investment than Gotham Defensive. But when comparing it to its historical volatility, Franklin High Yield is 2.37 times less risky than Gotham Defensive. It trades about 0.24 of its potential returns per unit of risk. Gotham Defensive Long is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,840 in Gotham Defensive Long on August 30, 2024 and sell it today you would earn a total of 46.00 from holding Gotham Defensive Long or generate 2.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Franklin High Yield vs. Gotham Defensive Long
Performance |
| Timeline |
| Franklin High Yield |
| Gotham Defensive Long |
Franklin High and Gotham Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Gotham Defensive
The main advantage of trading using opposite Franklin High and Gotham Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Gotham Defensive 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 Gotham Defensive will offset losses from the drop in Gotham Defensive's long position.| Franklin High vs. Nuveen Massachusetts Municipal | Franklin High vs. Mirova Global Green | Franklin High vs. Sterling Capital Short | Franklin High vs. Maryland Tax Free Bond |
| Gotham Defensive vs. Franklin High Yield | Gotham Defensive vs. T Rowe Price | Gotham Defensive vs. Counterpoint Tactical Municipal | Gotham Defensive vs. Transamerica Intermediate Muni |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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