Correlation Between GM and Franklin Growth
Can any of the company-specific risk be diversified away by investing in both GM and Franklin Growth 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 Growth 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 Growth Opportunities, you can compare the effects of market volatilities on GM and Franklin Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Franklin Growth.
Diversification Opportunities for GM and Franklin Growth
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Franklin Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth Oppo 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth Oppo has no effect on the direction of GM i.e., GM and Franklin Growth go up and down completely randomly.
Pair Corralation between GM and Franklin Growth
Allowing for the 90-day total investment horizon GM is expected to generate 1.27 times less return on investment than Franklin Growth. In addition to that, GM is 1.19 times more volatile than Franklin Growth Opportunities. It trades about 0.05 of its total potential returns per unit of risk. Franklin Growth Opportunities is currently generating about 0.07 per unit of volatility. If you would invest 3,266 in Franklin Growth Opportunities on September 3, 2024 and sell it today you would earn a total of 2,279 from holding Franklin Growth Opportunities or generate 69.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Franklin Growth Opportunities
Performance |
| Timeline |
| General Motors |
| Franklin Growth Oppo |
GM and Franklin Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Franklin Growth
The main advantage of trading using opposite GM and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Franklin Growth 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 Growth will offset losses from the drop in Franklin Growth's long position.The idea behind General Motors and Franklin Growth Opportunities 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 Growth vs. American Funds The | Franklin Growth vs. American Funds The | Franklin Growth vs. Growth Fund Of | Franklin Growth vs. Growth Fund Of |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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