Correlation Between Franklin Federal and Royce Opportunity
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Royce Opportunity 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 Royce Opportunity 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 Royce Opportunity Fund, you can compare the effects of market volatilities on Franklin Federal and Royce Opportunity 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 Royce Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Royce Opportunity.
Diversification Opportunities for Franklin Federal and Royce Opportunity
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and Royce is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity 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 Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of Franklin Federal i.e., Franklin Federal and Royce Opportunity go up and down completely randomly.
Pair Corralation between Franklin Federal and Royce Opportunity
Assuming the 90 days horizon Franklin Federal is expected to generate 15.61 times less return on investment than Royce Opportunity. But when comparing it to its historical volatility, Franklin Federal Limited Term is 12.73 times less risky than Royce Opportunity. It trades about 0.23 of its potential returns per unit of risk. Royce Opportunity Fund is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,213 in Royce Opportunity Fund on August 30, 2024 and sell it today you would earn a total of 132.00 from holding Royce Opportunity Fund or generate 10.88% 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. Royce Opportunity Fund
Performance |
| Timeline |
| Franklin Federal Lim |
| Royce Opportunity |
Franklin Federal and Royce Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Royce Opportunity
The main advantage of trading using opposite Franklin Federal and Royce Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Royce Opportunity 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 Royce Opportunity will offset losses from the drop in Royce Opportunity's long position.| Franklin Federal vs. Franklin Mutual Beacon | Franklin Federal vs. Templeton Developing Markets | Franklin Federal vs. Franklin Mutual Global | Franklin Federal vs. Franklin Mutual Global |
| Royce Opportunity vs. Franklin Federal Limited Term | Royce Opportunity vs. Locorr Longshort Modities | Royce Opportunity vs. Sterling Capital Short | Royce Opportunity vs. Old Westbury Short Term |
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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