Correlation Between GM and Franklin Dynatech
Can any of the company-specific risk be diversified away by investing in both GM and Franklin Dynatech 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 GM and Franklin Dynatech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Franklin Dynatech Fund, you can compare the effects of market volatilities on GM and Franklin Dynatech 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 GM with a short position of Franklin Dynatech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Franklin Dynatech.
Diversification Opportunities for GM and Franklin Dynatech
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Franklin is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Franklin Dynatech Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Dynatech and GM 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 General Motors are associated (or correlated) with Franklin Dynatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Dynatech has no effect on the direction of GM i.e., GM and Franklin Dynatech go up and down completely randomly.
Pair Corralation between GM and Franklin Dynatech
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Franklin Dynatech. In addition to that, GM is 1.86 times more volatile than Franklin Dynatech Fund. It trades about -0.34 of its total potential returns per unit of risk. Franklin Dynatech Fund is currently generating about -0.07 per unit of volatility. If you would invest 18,796 in Franklin Dynatech Fund on November 27, 2024 and sell it today you would lose (350.00) from holding Franklin Dynatech Fund or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Franklin Dynatech Fund
Performance |
| Timeline |
| General Motors |
| Franklin Dynatech |
GM and Franklin Dynatech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Franklin Dynatech
The main advantage of trading using opposite GM and Franklin Dynatech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Franklin Dynatech 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 Franklin Dynatech will offset losses from the drop in Franklin Dynatech's long position.The idea behind General Motors and Franklin Dynatech Fund 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.| Franklin Dynatech vs. Mfs International Diversification | Franklin Dynatech vs. John Hancock Bond | Franklin Dynatech vs. Lord Abbett Bond | Franklin Dynatech vs. Prudential Total Return |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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