Correlation Between NYSE Composite and Franklin Biotechnology
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Franklin Biotechnology 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 NYSE Composite and Franklin Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Franklin Biotechnology Discovery, you can compare the effects of market volatilities on NYSE Composite and Franklin Biotechnology 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 NYSE Composite with a short position of Franklin Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Franklin Biotechnology.
Diversification Opportunities for NYSE Composite and Franklin Biotechnology
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between NYSE and Franklin is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Franklin Biotechnology Discove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Biotechnology and NYSE Composite 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 NYSE Composite are associated (or correlated) with Franklin Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Biotechnology has no effect on the direction of NYSE Composite i.e., NYSE Composite and Franklin Biotechnology go up and down completely randomly.
Pair Corralation between NYSE Composite and Franklin Biotechnology
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.07 times less return on investment than Franklin Biotechnology. But when comparing it to its historical volatility, NYSE Composite is 1.6 times less risky than Franklin Biotechnology. It trades about 0.08 of its potential returns per unit of risk. Franklin Biotechnology Discovery is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 10,742 in Franklin Biotechnology Discovery on August 30, 2024 and sell it today you would earn a total of 3,436 from holding Franklin Biotechnology Discovery or generate 31.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Franklin Biotechnology Discove
Performance |
| Timeline |
NYSE Composite and Franklin Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Franklin Biotechnology Discovery
Pair trading matchups for Franklin Biotechnology
Pair Trading with NYSE Composite and Franklin Biotechnology
The main advantage of trading using opposite NYSE Composite and Franklin Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Franklin Biotechnology 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 Biotechnology will offset losses from the drop in Franklin Biotechnology's long position.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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