Correlation Between Franklin Natural and Franklin Strategic
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Franklin Strategic 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 Franklin Strategic 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 Franklin Strategic Income, you can compare the effects of market volatilities on Franklin Natural and Franklin Strategic 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 Franklin Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Franklin Strategic.
Diversification Opportunities for Franklin Natural and Franklin Strategic
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and Franklin is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Franklin Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Strategic Income 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 Franklin Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Strategic Income has no effect on the direction of Franklin Natural i.e., Franklin Natural and Franklin Strategic go up and down completely randomly.
Pair Corralation between Franklin Natural and Franklin Strategic
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 2.6 times more return on investment than Franklin Strategic. However, Franklin Natural is 2.6 times more volatile than Franklin Strategic Income. It trades about 0.2 of its potential returns per unit of risk. Franklin Strategic Income is currently generating about 0.04 per unit of risk. If you would invest 3,049 in Franklin Natural Resources on August 31, 2024 and sell it today you would earn a total of 110.00 from holding Franklin Natural Resources or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Natural Resources vs. Franklin Strategic Income
Performance |
| Timeline |
| Franklin Natural Res |
| Franklin Strategic Income |
Franklin Natural and Franklin Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Franklin Strategic
The main advantage of trading using opposite Franklin Natural and Franklin Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Franklin Strategic 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 Franklin Strategic will offset losses from the drop in Franklin Strategic's long position.| Franklin Natural vs. Lord Abbett Government | Franklin Natural vs. Government Securities Fund | Franklin Natural vs. Us Government Securities | Franklin Natural vs. Aig Government Money |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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