Correlation Between Franklin Large and Brompton European
Can any of the company-specific risk be diversified away by investing in both Franklin Large and Brompton European 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 Large and Brompton European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Large Cap and Brompton European Dividend, you can compare the effects of market volatilities on Franklin Large and Brompton European 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 Large with a short position of Brompton European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Large and Brompton European.
Diversification Opportunities for Franklin Large and Brompton European
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Brompton is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Large Cap and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European and Franklin Large 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 Large Cap are associated (or correlated) with Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of Franklin Large i.e., Franklin Large and Brompton European go up and down completely randomly.
Pair Corralation between Franklin Large and Brompton European
Assuming the 90 days trading horizon Franklin Large Cap is expected to generate 0.56 times more return on investment than Brompton European. However, Franklin Large Cap is 1.78 times less risky than Brompton European. It trades about 0.17 of its potential returns per unit of risk. Brompton European Dividend is currently generating about -0.03 per unit of risk. If you would invest 4,689 in Franklin Large Cap on August 25, 2024 and sell it today you would earn a total of 152.00 from holding Franklin Large Cap or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Franklin Large Cap vs. Brompton European Dividend
Performance |
| Timeline |
| Franklin Large Cap |
| Brompton European |
Franklin Large and Brompton European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Large and Brompton European
The main advantage of trading using opposite Franklin Large and Brompton European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Large position performs unexpectedly, Brompton European 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 Brompton European will offset losses from the drop in Brompton European's long position.| Franklin Large vs. Franklin Bissett Corporate | Franklin Large vs. FT AlphaDEX Industrials | Franklin Large vs. Dynamic Active Dividend |
| Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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