Correlation Between Franklin High and State Farm
Can any of the company-specific risk be diversified away by investing in both Franklin High and State Farm 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 State Farm 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 State Farm Interim, you can compare the effects of market volatilities on Franklin High and State Farm 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 State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and State Farm.
Diversification Opportunities for Franklin High and State Farm
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and State is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and State Farm Interim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Interim 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 State Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Farm Interim has no effect on the direction of Franklin High i.e., Franklin High and State Farm go up and down completely randomly.
Pair Corralation between Franklin High and State Farm
Assuming the 90 days horizon Franklin High Yield is expected to generate 1.82 times more return on investment than State Farm. However, Franklin High is 1.82 times more volatile than State Farm Interim. It trades about 0.16 of its potential returns per unit of risk. State Farm Interim is currently generating about 0.09 per unit of risk. If you would invest 905.00 in Franklin High Yield on September 14, 2024 and sell it today you would earn a total of 6.00 from holding Franklin High Yield or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Franklin High Yield vs. State Farm Interim
Performance |
| Timeline |
| Franklin High Yield |
| State Farm Interim |
Franklin High and State Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and State Farm
The main advantage of trading using opposite Franklin High and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, State Farm 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 State Farm will offset losses from the drop in State Farm'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 |
| State Farm vs. Locorr Market Trend | State Farm vs. Aqr Long Short Equity | State Farm vs. Transamerica Emerging Markets | State Farm vs. Sp Midcap Index |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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