Correlation Between Franklin High and M Large
Can any of the company-specific risk be diversified away by investing in both Franklin High and M Large 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 M Large 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 M Large Cap, you can compare the effects of market volatilities on Franklin High and M Large 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 M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and M Large.
Diversification Opportunities for Franklin High and M Large
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Franklin and MTCGX is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap 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 M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Franklin High i.e., Franklin High and M Large go up and down completely randomly.
Pair Corralation between Franklin High and M Large
Assuming the 90 days horizon Franklin High is expected to generate 2.23 times less return on investment than M Large. But when comparing it to its historical volatility, Franklin High Yield is 4.54 times less risky than M Large. It trades about 0.17 of its potential returns per unit of risk. M Large Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,888 in M Large Cap on September 14, 2024 and sell it today you would earn a total of 869.00 from holding M Large Cap or generate 30.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Yield vs. M Large Cap
Performance |
| Timeline |
| Franklin High Yield |
| M Large Cap |
Franklin High and M Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and M Large
The main advantage of trading using opposite Franklin High and M Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, M Large 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 M Large will offset losses from the drop in M Large's long position.| Franklin High vs. Blackrock High Yield | Franklin High vs. Voya High Yield | Franklin High vs. Guggenheim High Yield | Franklin High vs. Gmo High Yield |
| M Large vs. Alliancebernstein National Municipal | M Large vs. Transamerica Intermediate Muni | M Large vs. Franklin High Yield | M Large vs. The National Tax Free |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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