Correlation Between Microsoft and Franklin Strategic
Can any of the company-specific risk be diversified away by investing in both Microsoft and Franklin Strategic 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 Microsoft and Franklin Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Franklin Strategic Income, you can compare the effects of market volatilities on Microsoft and Franklin Strategic 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 Microsoft with a short position of Franklin Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Franklin Strategic.
Diversification Opportunities for Microsoft and Franklin Strategic
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Franklin is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Franklin Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Strategic Income and Microsoft 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 Microsoft are associated (or correlated) with Franklin Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Strategic Income has no effect on the direction of Microsoft i.e., Microsoft and Franklin Strategic go up and down completely randomly.
Pair Corralation between Microsoft and Franklin Strategic
Given the investment horizon of 90 days Microsoft is expected to generate 3.69 times more return on investment than Franklin Strategic. However, Microsoft is 3.69 times more volatile than Franklin Strategic Income. It trades about 0.19 of its potential returns per unit of risk. Franklin Strategic Income is currently generating about 0.11 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Franklin Strategic Income
Performance |
| Timeline |
| Microsoft |
| Franklin Strategic Income |
Microsoft and Franklin Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Franklin Strategic
The main advantage of trading using opposite Microsoft and Franklin Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Franklin Strategic 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 Strategic will offset losses from the drop in Franklin Strategic's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Franklin Strategic vs. Franklin Mutual Beacon | Franklin Strategic vs. Templeton Developing Markets | Franklin Strategic vs. Franklin Mutual Global | Franklin Strategic vs. Franklin Mutual Global |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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