Correlation Between Franklin Natural and New Economy
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Franklin Natural and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and New Economy.
Diversification Opportunities for Franklin Natural and New Economy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and New is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Franklin Natural i.e., Franklin Natural and New Economy go up and down completely randomly.
Pair Corralation between Franklin Natural and New Economy
Assuming the 90 days horizon Franklin Natural is expected to generate 1.79 times less return on investment than New Economy. In addition to that, Franklin Natural is 1.06 times more volatile than New Economy Fund. It trades about 0.05 of its total potential returns per unit of risk. New Economy Fund is currently generating about 0.09 per unit of volatility. If you would invest 4,674 in New Economy Fund on August 24, 2024 and sell it today you would earn a total of 1,132 from holding New Economy Fund or generate 24.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Franklin Natural Resources vs. New Economy Fund
Performance |
| Timeline |
| Franklin Natural Res |
| New Economy Fund |
Franklin Natural and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and New Economy
The main advantage of trading using opposite Franklin Natural and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Franklin Natural vs. Vanguard Materials Index | Franklin Natural vs. T Rowe Price | Franklin Natural vs. Gmo Trust | Franklin Natural vs. Gmo Resources |
| New Economy vs. World Energy Fund | New Economy vs. Gmo Resources | New Economy vs. Franklin Natural Resources | New Economy vs. Dreyfus 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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