Correlation Between Franklin High and Prudential Short-term
Can any of the company-specific risk be diversified away by investing in both Franklin High and Prudential Short-term 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 Prudential Short-term 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 Prudential Short Term Porate, you can compare the effects of market volatilities on Franklin High and Prudential Short-term 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 Prudential Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Prudential Short-term.
Diversification Opportunities for Franklin High and Prudential Short-term
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Prudential is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Prudential Short Term Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Term 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 Prudential Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Term has no effect on the direction of Franklin High i.e., Franklin High and Prudential Short-term go up and down completely randomly.
Pair Corralation between Franklin High and Prudential Short-term
Assuming the 90 days horizon Franklin High Yield is expected to generate 1.53 times more return on investment than Prudential Short-term. However, Franklin High is 1.53 times more volatile than Prudential Short Term Porate. It trades about 0.08 of its potential returns per unit of risk. Prudential Short Term Porate is currently generating about 0.11 per unit of risk. If you would invest 814.00 in Franklin High Yield on September 3, 2024 and sell it today you would earn a total of 103.00 from holding Franklin High Yield or generate 12.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Yield vs. Prudential Short Term Porate
Performance |
| Timeline |
| Franklin High Yield |
| Prudential Short Term |
Franklin High and Prudential Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Prudential Short-term
The main advantage of trading using opposite Franklin High and Prudential Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Prudential Short-term 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 Prudential Short-term will offset losses from the drop in Prudential Short-term's long position.| Franklin High vs. Nuveen High Yield | Franklin High vs. Nuveen High Yield | Franklin High vs. Nuveen High Yield | Franklin High vs. Nuveen High Yield |
| Prudential Short-term vs. Franklin High Yield | Prudential Short-term vs. Morningstar Municipal Bond | Prudential Short-term vs. T Rowe Price | Prudential Short-term vs. Ab Impact Municipal |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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