Correlation Between Franklin Natural and Capital World
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Franklin Natural and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Capital World.
Diversification Opportunities for Franklin Natural and Capital World
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Franklin and Capital is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Franklin Natural i.e., Franklin Natural and Capital World go up and down completely randomly.
Pair Corralation between Franklin Natural and Capital World
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 1.95 times more return on investment than Capital World. However, Franklin Natural is 1.95 times more volatile than Capital World Bond. It trades about 0.22 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.02 per unit of risk. If you would invest 3,041 in Franklin Natural Resources on September 1, 2024 and sell it today you would earn a total of 118.00 from holding Franklin Natural Resources or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Natural Resources vs. Capital World Bond
Performance |
| Timeline |
| Franklin Natural Res |
| Capital World Bond |
Franklin Natural and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Capital World
The main advantage of trading using opposite Franklin Natural and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Franklin Natural vs. Lord Abbett Small | Franklin Natural vs. Great West Loomis Sayles | Franklin Natural vs. Amg River Road | Franklin Natural vs. Heartland Value Plus |
| Capital World vs. Gmo Resources | Capital World vs. Dreyfus Natural Resources | Capital World vs. Franklin Natural Resources | Capital World vs. Oil Gas Ultrasector |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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