Correlation Between Main Street and Franklin Resources
Can any of the company-specific risk be diversified away by investing in both Main Street and Franklin Resources 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 Main Street and Franklin Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Street Capital and Franklin Resources, you can compare the effects of market volatilities on Main Street and Franklin Resources 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 Main Street with a short position of Franklin Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Franklin Resources.
Diversification Opportunities for Main Street and Franklin Resources
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Main and Franklin is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Franklin Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Resources and Main Street 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 Main Street Capital are associated (or correlated) with Franklin Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Resources has no effect on the direction of Main Street i.e., Main Street and Franklin Resources go up and down completely randomly.
Pair Corralation between Main Street and Franklin Resources
Given the investment horizon of 90 days Main Street is expected to generate 2.91 times less return on investment than Franklin Resources. But when comparing it to its historical volatility, Main Street Capital is 2.59 times less risky than Franklin Resources. It trades about 0.15 of its potential returns per unit of risk. Franklin Resources is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,041 in Franklin Resources on November 4, 2024 and sell it today you would earn a total of 183.00 from holding Franklin Resources or generate 8.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. Franklin Resources
Performance |
| Timeline |
| Main Street Capital |
| Franklin Resources |
Main Street and Franklin Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Franklin Resources
The main advantage of trading using opposite Main Street and Franklin Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Franklin Resources 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 Resources will offset losses from the drop in Franklin Resources' long position.| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
| Franklin Resources vs. BlackRock | Franklin Resources vs. Main Street Capital | Franklin Resources vs. Blackstone Group | Franklin Resources vs. Ares Capital |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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