Correlation Between Franklin Utilities and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Franklin Utilities and Franklin Natural 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 Utilities and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Utilities Fund and Franklin Natural Resources, you can compare the effects of market volatilities on Franklin Utilities and Franklin Natural 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 Utilities with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Utilities and Franklin Natural.
Diversification Opportunities for Franklin Utilities and Franklin Natural
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and FRANKLIN is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Utilities Fund and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and Franklin Utilities 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 Utilities Fund are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of Franklin Utilities i.e., Franklin Utilities and Franklin Natural go up and down completely randomly.
Pair Corralation between Franklin Utilities and Franklin Natural
Assuming the 90 days horizon Franklin Utilities Fund is expected to generate 0.87 times more return on investment than Franklin Natural. However, Franklin Utilities Fund is 1.14 times less risky than Franklin Natural. It trades about 0.05 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.03 per unit of risk. If you would invest 2,109 in Franklin Utilities Fund on August 29, 2024 and sell it today you would earn a total of 483.00 from holding Franklin Utilities Fund or generate 22.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Utilities Fund vs. Franklin Natural Resources
Performance |
| Timeline |
| Franklin Utilities |
| Franklin Natural Res |
Franklin Utilities and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Utilities and Franklin Natural
The main advantage of trading using opposite Franklin Utilities and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Utilities position performs unexpectedly, Franklin Natural 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 Franklin Natural will offset losses from the drop in Franklin Natural's long position.| Franklin Utilities vs. Angel Oak Multi Strategy | Franklin Utilities vs. Origin Emerging Markets | Franklin Utilities vs. Transamerica Emerging Markets | Franklin Utilities vs. Ep Emerging Markets |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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