Correlation Between Franklin New and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Franklin New and Franklin Federal 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 New and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin New York and Franklin Federal Limited Term, you can compare the effects of market volatilities on Franklin New and Franklin Federal 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 New with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin New and Franklin Federal.
Diversification Opportunities for Franklin New and Franklin Federal
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Franklin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin New York and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim and Franklin New 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 New York are associated (or correlated) with Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Lim has no effect on the direction of Franklin New i.e., Franklin New and Franklin Federal go up and down completely randomly.
Pair Corralation between Franklin New and Franklin Federal
Assuming the 90 days horizon Franklin New York is expected to generate 2.73 times more return on investment than Franklin Federal. However, Franklin New is 2.73 times more volatile than Franklin Federal Limited Term. It trades about 0.23 of its potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.23 per unit of risk. If you would invest 992.00 in Franklin New York on August 30, 2024 and sell it today you would earn a total of 18.00 from holding Franklin New York or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin New York vs. Franklin Federal Limited Term
Performance |
| Timeline |
| Franklin New York |
| Franklin Federal Lim |
Franklin New and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin New and Franklin Federal
The main advantage of trading using opposite Franklin New and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin New position performs unexpectedly, Franklin Federal 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 Federal will offset losses from the drop in Franklin Federal's long position.| Franklin New vs. Sterling Capital Short | Franklin New vs. Ab Select Longshort | Franklin New vs. Barings Active Short | Franklin New vs. Touchstone Ultra Short |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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