Correlation Between Franklin Equity and Vaughan Nelson

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Can any of the company-specific risk be diversified away by investing in both Franklin Equity and Vaughan Nelson 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 Equity and Vaughan Nelson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Equity Income and Vaughan Nelson International, you can compare the effects of market volatilities on Franklin Equity and Vaughan Nelson 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 Equity with a short position of Vaughan Nelson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Equity and Vaughan Nelson.

Diversification Opportunities for Franklin Equity and Vaughan Nelson

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Franklin and Vaughan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Equity Income and Vaughan Nelson International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaughan Nelson Inter and Franklin Equity 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 Equity Income are associated (or correlated) with Vaughan Nelson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaughan Nelson Inter has no effect on the direction of Franklin Equity i.e., Franklin Equity and Vaughan Nelson go up and down completely randomly.

Pair Corralation between Franklin Equity and Vaughan Nelson

Assuming the 90 days horizon Franklin Equity Income is expected to generate 0.73 times more return on investment than Vaughan Nelson. However, Franklin Equity Income is 1.36 times less risky than Vaughan Nelson. It trades about 0.04 of its potential returns per unit of risk. Vaughan Nelson International is currently generating about 0.01 per unit of risk. If you would invest  2,742  in Franklin Equity Income on October 9, 2024 and sell it today you would earn a total of  409.00  from holding Franklin Equity Income or generate 14.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Franklin Equity Income  vs.  Vaughan Nelson International

 Performance 
       Timeline  
Franklin Equity Income 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Franklin Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
Vaughan Nelson Inter 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vaughan Nelson International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Vaughan Nelson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Equity and Vaughan Nelson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Equity and Vaughan Nelson

The main advantage of trading using opposite Franklin Equity and Vaughan Nelson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Equity position performs unexpectedly, Vaughan Nelson 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 Vaughan Nelson will offset losses from the drop in Vaughan Nelson's long position.
The idea behind Franklin Equity Income and Vaughan Nelson International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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