Correlation Between Franklin Natural and Growth Allocation
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Growth Allocation 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 Natural and Growth Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Natural Resources and Growth Allocation Index, you can compare the effects of market volatilities on Franklin Natural and Growth Allocation 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 Natural with a short position of Growth Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Growth Allocation.
Diversification Opportunities for Franklin Natural and Growth Allocation
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Growth is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Growth Allocation Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Allocation Index and Franklin Natural 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 Natural Resources are associated (or correlated) with Growth Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Allocation Index has no effect on the direction of Franklin Natural i.e., Franklin Natural and Growth Allocation go up and down completely randomly.
Pair Corralation between Franklin Natural and Growth Allocation
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 2.09 times more return on investment than Growth Allocation. However, Franklin Natural is 2.09 times more volatile than Growth Allocation Index. It trades about 0.07 of its potential returns per unit of risk. Growth Allocation Index is currently generating about 0.14 per unit of risk. If you would invest 2,938 in Franklin Natural Resources on September 12, 2024 and sell it today you would earn a total of 115.00 from holding Franklin Natural Resources or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Natural Resources vs. Growth Allocation Index
Performance |
| Timeline |
| Franklin Natural Res |
| Growth Allocation Index |
Franklin Natural and Growth Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Growth Allocation
The main advantage of trading using opposite Franklin Natural and Growth Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Growth Allocation 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 Growth Allocation will offset losses from the drop in Growth Allocation's long position.| Franklin Natural vs. Vanguard Financials Index | Franklin Natural vs. Prudential Jennison Financial | Franklin Natural vs. John Hancock Financial | Franklin Natural vs. Mesirow Financial Small |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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