Correlation Between Gmo High and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Gmo High and Franklin Natural 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 Gmo High and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Franklin Natural Resources, you can compare the effects of market volatilities on Gmo High and Franklin Natural 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 Gmo High with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Franklin Natural.
Diversification Opportunities for Gmo High and Franklin Natural
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gmo and Franklin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and Gmo High 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 Gmo High Yield are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of Gmo High i.e., Gmo High and Franklin Natural go up and down completely randomly.
Pair Corralation between Gmo High and Franklin Natural
Assuming the 90 days horizon Gmo High is expected to generate 4.38 times less return on investment than Franklin Natural. But when comparing it to its historical volatility, Gmo High Yield is 4.56 times less risky than Franklin Natural. It trades about 0.17 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,984 in Franklin Natural Resources on August 25, 2024 and sell it today you would earn a total of 87.00 from holding Franklin Natural Resources or generate 2.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Franklin Natural Resources
Performance |
| Timeline |
| Gmo High Yield |
| Franklin Natural Res |
Gmo High and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Franklin Natural
The main advantage of trading using opposite Gmo High and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Franklin Natural 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 Natural will offset losses from the drop in Franklin Natural's long position.| Gmo High vs. Franklin Natural Resources | Gmo High vs. Alpsalerian Energy Infrastructure | Gmo High vs. Franklin Natural Resources | Gmo High vs. Tortoise Energy Independence |
| Franklin Natural vs. Vanguard Materials Index | Franklin Natural vs. T Rowe Price | Franklin Natural vs. Gmo Trust | Franklin Natural vs. Gmo 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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