Correlation Between Franklin Federal and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Diamond Hill 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 Federal and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Limited Term and Diamond Hill Small, you can compare the effects of market volatilities on Franklin Federal and Diamond Hill 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 Federal with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Diamond Hill.
Diversification Opportunities for Franklin Federal and Diamond Hill
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FRANKLIN and Diamond is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Diamond Hill Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Small and Franklin Federal 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 Federal Limited Term are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Small has no effect on the direction of Franklin Federal i.e., Franklin Federal and Diamond Hill go up and down completely randomly.
Pair Corralation between Franklin Federal and Diamond Hill
Assuming the 90 days horizon Franklin Federal Limited Term is expected to generate 0.07 times more return on investment than Diamond Hill. However, Franklin Federal Limited Term is 15.19 times less risky than Diamond Hill. It trades about 0.14 of its potential returns per unit of risk. Diamond Hill Small is currently generating about 0.01 per unit of risk. If you would invest 959.00 in Franklin Federal Limited Term on September 3, 2024 and sell it today you would earn a total of 75.00 from holding Franklin Federal Limited Term or generate 7.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Diamond Hill Small
Performance |
| Timeline |
| Franklin Federal Lim |
| Diamond Hill Small |
Franklin Federal and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Diamond Hill
The main advantage of trading using opposite Franklin Federal and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.| Franklin Federal vs. Alpine High Yield | Franklin Federal vs. Guggenheim High Yield | Franklin Federal vs. Blackrock High Yield | Franklin Federal vs. Pace High Yield |
| Diamond Hill vs. Gmo High Yield | Diamond Hill vs. T Rowe Price | Diamond Hill vs. Metropolitan West High | Diamond Hill vs. Needham Aggressive 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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