Correlation Between Franklin Natural and Putnam Equity
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Putnam Equity 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 Natural and Putnam Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Natural Resources and Putnam Equity Income, you can compare the effects of market volatilities on Franklin Natural and Putnam Equity 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 Natural with a short position of Putnam Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Putnam Equity.
Diversification Opportunities for Franklin Natural and Putnam Equity
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Putnam is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Putnam Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Equity Income and Franklin Natural 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 Natural Resources are associated (or correlated) with Putnam Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Equity Income has no effect on the direction of Franklin Natural i.e., Franklin Natural and Putnam Equity go up and down completely randomly.
Pair Corralation between Franklin Natural and Putnam Equity
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 1.1 times more return on investment than Putnam Equity. However, Franklin Natural is 1.1 times more volatile than Putnam Equity Income. It trades about 0.28 of its potential returns per unit of risk. Putnam Equity Income is currently generating about 0.17 per unit of risk. If you would invest 2,973 in Franklin Natural Resources on August 28, 2024 and sell it today you would earn a total of 140.00 from holding Franklin Natural Resources or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Natural Resources vs. Putnam Equity Income
Performance |
| Timeline |
| Franklin Natural Res |
| Putnam Equity Income |
Franklin Natural and Putnam Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Putnam Equity
The main advantage of trading using opposite Franklin Natural and Putnam Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Putnam Equity 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 Putnam Equity will offset losses from the drop in Putnam Equity's long position.| Franklin Natural vs. Franklin Mutual Beacon | Franklin Natural vs. Templeton Developing Markets | Franklin Natural vs. Franklin Mutual Global | Franklin Natural vs. Franklin Mutual Global |
| Putnam Equity vs. Firsthand Alternative Energy | Putnam Equity vs. Fidelity Advisor Energy | Putnam Equity vs. Goehring Rozencwajg Resources | Putnam Equity vs. Franklin Natural Resources |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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