Correlation Between Franklin Gold and The Gold

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

Diversification Opportunities for Franklin Gold and The Gold

FranklinTheDiversified AwayFranklinTheDiversified Away100%
0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Franklin and The is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Gold Precious and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion and Franklin Gold 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 Gold Precious are associated (or correlated) with The Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Franklin Gold i.e., Franklin Gold and The Gold go up and down completely randomly.

Pair Corralation between Franklin Gold and The Gold

Assuming the 90 days horizon Franklin Gold Precious is expected to generate 1.74 times more return on investment than The Gold. However, Franklin Gold is 1.74 times more volatile than The Gold Bullion. It trades about 0.26 of its potential returns per unit of risk. The Gold Bullion is currently generating about 0.26 per unit of risk. If you would invest  1,678  in Franklin Gold Precious on November 25, 2024 and sell it today you would earn a total of  154.00  from holding Franklin Gold Precious or generate 9.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Franklin Gold Precious  vs.  The Gold Bullion

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0510152025
JavaScript chart by amCharts 3.21.15FRGOX QGLDX
       Timeline  
Franklin Gold Precious 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Gold Precious are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Gold showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1515.51616.51717.51818.519
Gold Bullion 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, The Gold may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb20.52121.52222.5

Franklin Gold and The Gold Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.01-3.75-2.5-1.240.0231.382.764.135.51 0.10.20.30.4
JavaScript chart by amCharts 3.21.15FRGOX QGLDX
       Returns  

Pair Trading with Franklin Gold and The Gold

The main advantage of trading using opposite Franklin Gold and The Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Gold position performs unexpectedly, The Gold 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 The Gold will offset losses from the drop in The Gold's long position.
The idea behind Franklin Gold Precious and The Gold Bullion 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.
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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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