Correlation Between Franklin Convertible and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Franklin Convertible and Absolute Convertible 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 Convertible and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Vertible Securities and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Franklin Convertible and Absolute Convertible 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 Convertible with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Convertible and Absolute Convertible.
Diversification Opportunities for Franklin Convertible and Absolute Convertible
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Absolute is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Vertible Securities and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Franklin Convertible 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 Vertible Securities are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Franklin Convertible i.e., Franklin Convertible and Absolute Convertible go up and down completely randomly.
Pair Corralation between Franklin Convertible and Absolute Convertible
Assuming the 90 days horizon Franklin Vertible Securities is expected to generate 9.02 times more return on investment than Absolute Convertible. However, Franklin Convertible is 9.02 times more volatile than Absolute Convertible Arbitrage. It trades about 0.16 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.56 per unit of risk. If you would invest 1,966 in Franklin Vertible Securities on August 24, 2024 and sell it today you would earn a total of 426.00 from holding Franklin Vertible Securities or generate 21.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Vertible Securities vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Franklin Convertible |
| Absolute Convertible |
Franklin Convertible and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Convertible and Absolute Convertible
The main advantage of trading using opposite Franklin Convertible and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Convertible position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Franklin Convertible vs. Franklin Equity Income | Franklin Convertible vs. Franklin Utilities Fund | Franklin Convertible vs. Franklin Strategic Income | Franklin Convertible vs. Franklin Rising Dividends |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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