Correlation Between Franklin Real and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Franklin Real and Pear Tree 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 Real and Pear Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Real Estate and Pear Tree Polaris, you can compare the effects of market volatilities on Franklin Real and Pear Tree 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 Real with a short position of Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Real and Pear Tree.
Diversification Opportunities for Franklin Real and Pear Tree
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Franklin and Pear is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Real Estate and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris and Franklin Real 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 Real Estate are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Franklin Real i.e., Franklin Real and Pear Tree go up and down completely randomly.
Pair Corralation between Franklin Real and Pear Tree
Assuming the 90 days horizon Franklin Real Estate is expected to generate 0.88 times more return on investment than Pear Tree. However, Franklin Real Estate is 1.14 times less risky than Pear Tree. It trades about 0.02 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.11 per unit of risk. If you would invest 1,910 in Franklin Real Estate on September 13, 2024 and sell it today you would earn a total of 4.00 from holding Franklin Real Estate or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Real Estate vs. Pear Tree Polaris
Performance |
| Timeline |
| Franklin Real Estate |
| Pear Tree Polaris |
Franklin Real and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Real and Pear Tree
The main advantage of trading using opposite Franklin Real and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Real position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Franklin Real vs. Franklin Natural Resources | Franklin Real vs. Franklin Small Cap | Franklin Real vs. Templeton Developing Markets | Franklin Real vs. Franklin Balance Sheet |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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