Correlation Between Franklin Natural and Health Care
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Health Care 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 Health Care 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 Health Care Ultrasector, you can compare the effects of market volatilities on Franklin Natural and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Health Care.
Diversification Opportunities for Franklin Natural and Health Care
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Health is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Ultrasector has no effect on the direction of Franklin Natural i.e., Franklin Natural and Health Care go up and down completely randomly.
Pair Corralation between Franklin Natural and Health Care
Assuming the 90 days horizon Franklin Natural is expected to generate 5.58 times less return on investment than Health Care. But when comparing it to its historical volatility, Franklin Natural Resources is 1.42 times less risky than Health Care. It trades about 0.09 of its potential returns per unit of risk. Health Care Ultrasector is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 9,796 in Health Care Ultrasector on November 3, 2024 and sell it today you would earn a total of 974.00 from holding Health Care Ultrasector or generate 9.94% 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. Health Care Ultrasector
Performance |
| Timeline |
| Franklin Natural Res |
| Health Care Ultrasector |
Franklin Natural and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Health Care
The main advantage of trading using opposite Franklin Natural and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Franklin Natural vs. Fidelity Sai Convertible | Franklin Natural vs. Putnam Convertible Securities | Franklin Natural vs. Rationalpier 88 Convertible | Franklin Natural vs. Advent Claymore Convertible |
| Health Care vs. Vanguard Growth And | Health Care vs. Qs Large Cap | Health Care vs. Federated Emerging Market | Health Care vs. Tfa Alphagen Growth |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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