Correlation Between Franklin Real and Financial Services
Can any of the company-specific risk be diversified away by investing in both Franklin Real and Financial Services 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 Financial Services 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 Financial Services Fund, you can compare the effects of market volatilities on Franklin Real and Financial Services 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 Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Real and Financial Services.
Diversification Opportunities for Franklin Real and Financial Services
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between FRANKLIN and Financial is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Real Estate and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services 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 Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Franklin Real i.e., Franklin Real and Financial Services go up and down completely randomly.
Pair Corralation between Franklin Real and Financial Services
Assuming the 90 days horizon Franklin Real is expected to generate 2.62 times less return on investment than Financial Services. But when comparing it to its historical volatility, Franklin Real Estate is 1.32 times less risky than Financial Services. It trades about 0.21 of its potential returns per unit of risk. Financial Services Fund is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 8,518 in Financial Services Fund on September 3, 2024 and sell it today you would earn a total of 872.00 from holding Financial Services Fund or generate 10.24% 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. Financial Services Fund
Performance |
| Timeline |
| Franklin Real Estate |
| Financial Services |
Franklin Real and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Real and Financial Services
The main advantage of trading using opposite Franklin Real and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Real position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' 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 |
| Financial Services vs. Templeton Emerging Markets | Financial Services vs. The Emerging Markets | Financial Services vs. Growth Strategy Fund | Financial Services vs. T Rowe Price |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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