Correlation Between Franklin Natural and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Metropolitan West 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 Metropolitan West 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 Metropolitan West High, you can compare the effects of market volatilities on Franklin Natural and Metropolitan West 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 Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Metropolitan West.
Diversification Opportunities for Franklin Natural and Metropolitan West
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Franklin and Metropolitan is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Metropolitan West High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West High 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 Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West High has no effect on the direction of Franklin Natural i.e., Franklin Natural and Metropolitan West go up and down completely randomly.
Pair Corralation between Franklin Natural and Metropolitan West
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 7.56 times more return on investment than Metropolitan West. However, Franklin Natural is 7.56 times more volatile than Metropolitan West High. It trades about 0.17 of its potential returns per unit of risk. Metropolitan West High is currently generating about 0.09 per unit of risk. If you would invest 3,061 in Franklin Natural Resources on September 5, 2024 and sell it today you would earn a total of 92.00 from holding Franklin Natural Resources or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Natural Resources vs. Metropolitan West High
Performance |
| Timeline |
| Franklin Natural Res |
| Metropolitan West High |
Franklin Natural and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Metropolitan West
The main advantage of trading using opposite Franklin Natural and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Franklin Natural vs. Bbh Intermediate Municipal | Franklin Natural vs. Materials Portfolio Fidelity | Franklin Natural vs. Rbb Fund | Franklin Natural vs. Falcon Focus Scv |
| Metropolitan West vs. Franklin Natural Resources | Metropolitan West vs. Fidelity Advisor Energy | Metropolitan West vs. Icon Natural Resources | Metropolitan West vs. Adams Natural Resources |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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