Correlation Between Franklin Natural and Transamerica High
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Transamerica High 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 Transamerica High 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 Transamerica High Yield, you can compare the effects of market volatilities on Franklin Natural and Transamerica High 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 Transamerica High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Transamerica High.
Diversification Opportunities for Franklin Natural and Transamerica High
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Transamerica is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Transamerica High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica High Yield 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 Transamerica High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica High Yield has no effect on the direction of Franklin Natural i.e., Franklin Natural and Transamerica High go up and down completely randomly.
Pair Corralation between Franklin Natural and Transamerica High
Assuming the 90 days horizon Franklin Natural Resources is expected to generate 5.7 times more return on investment than Transamerica High. However, Franklin Natural is 5.7 times more volatile than Transamerica High Yield. It trades about 0.1 of its potential returns per unit of risk. Transamerica High Yield is currently generating about 0.19 per unit of risk. If you would invest 3,000 in Franklin Natural Resources on September 3, 2024 and sell it today you would earn a total of 177.00 from holding Franklin Natural Resources or generate 5.9% 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. Transamerica High Yield
Performance |
| Timeline |
| Franklin Natural Res |
| Transamerica High Yield |
Franklin Natural and Transamerica High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Transamerica High
The main advantage of trading using opposite Franklin Natural and Transamerica High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Transamerica High 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 Transamerica High will offset losses from the drop in Transamerica High'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 |
| Transamerica High vs. Adams Natural Resources | Transamerica High vs. Icon Natural Resources | Transamerica High vs. Goehring Rozencwajg Resources | Transamerica High vs. Franklin 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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