Correlation Between Franklin Natural and Low-duration Bond
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Low-duration Bond 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 Low-duration Bond 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 Low Duration Bond Institutional, you can compare the effects of market volatilities on Franklin Natural and Low-duration Bond 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 Low-duration Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Low-duration Bond.
Diversification Opportunities for Franklin Natural and Low-duration Bond
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and Low-duration is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Low Duration Bond Institutiona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Low Duration Bond 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 Low-duration Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Low Duration Bond has no effect on the direction of Franklin Natural i.e., Franklin Natural and Low-duration Bond go up and down completely randomly.
Pair Corralation between Franklin Natural and Low-duration Bond
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 8.6 times more return on investment than Low-duration Bond. However, Franklin Natural is 8.6 times more volatile than Low Duration Bond Institutional. It trades about 0.02 of its potential returns per unit of risk. Low Duration Bond Institutional is currently generating about 0.13 per unit of risk. If you would invest 2,956 in Franklin Natural Resources on September 3, 2024 and sell it today you would earn a total of 221.00 from holding Franklin Natural Resources or generate 7.48% 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. Low Duration Bond Institutiona
Performance |
| Timeline |
| Franklin Natural Res |
| Low Duration Bond |
Franklin Natural and Low-duration Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Low-duration Bond
The main advantage of trading using opposite Franklin Natural and Low-duration Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Low-duration Bond 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 Low-duration Bond will offset losses from the drop in Low-duration Bond's long position.| Franklin Natural vs. Invesco Technology Fund | Franklin Natural vs. Janus Global Technology | Franklin Natural vs. Ivy Science And | Franklin Natural vs. Vanguard Information Technology |
| Low-duration Bond vs. Janus Global Technology | Low-duration Bond vs. Global Technology Portfolio | Low-duration Bond vs. Invesco Technology Fund | Low-duration Bond vs. Hennessy Technology Fund |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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