Correlation Between Franklin Natural and Virtus Real
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Virtus Real 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 Virtus Real 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 Virtus Real Estate, you can compare the effects of market volatilities on Franklin Natural and Virtus Real 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 Virtus Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Virtus Real.
Diversification Opportunities for Franklin Natural and Virtus Real
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and Virtus is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Virtus Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Real Estate 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 Virtus Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Real Estate has no effect on the direction of Franklin Natural i.e., Franklin Natural and Virtus Real go up and down completely randomly.
Pair Corralation between Franklin Natural and Virtus Real
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 0.86 times more return on investment than Virtus Real. However, Franklin Natural Resources is 1.16 times less risky than Virtus Real. It trades about 0.19 of its potential returns per unit of risk. Virtus Real Estate is currently generating about 0.11 per unit of risk. If you would invest 3,069 in Franklin Natural Resources on August 29, 2024 and sell it today you would earn a total of 109.00 from holding Franklin Natural Resources or generate 3.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Franklin Natural Resources vs. Virtus Real Estate
Performance |
| Timeline |
| Franklin Natural Res |
| Virtus Real Estate |
Franklin Natural and Virtus Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Virtus Real
The main advantage of trading using opposite Franklin Natural and Virtus Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Virtus Real 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 Virtus Real will offset losses from the drop in Virtus Real's long position.The idea behind Franklin Natural Resources and Virtus Real Estate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Virtus Real vs. Franklin Natural Resources | Virtus Real vs. HUMANA INC | Virtus Real vs. Aquagold International | Virtus Real vs. Barloworld Ltd ADR |
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 CEOs Directory module to screen CEOs from public companies around the world.
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