Correlation Between NYSE Composite and Franklin Government
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Franklin Government 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 Government 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 Government Securities, you can compare the effects of market volatilities on NYSE Composite and Franklin Government 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 Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Franklin Government.
Diversification Opportunities for NYSE Composite and Franklin Government
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NYSE and Franklin is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Franklin Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government 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 Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government has no effect on the direction of NYSE Composite i.e., NYSE Composite and Franklin Government go up and down completely randomly.
Pair Corralation between NYSE Composite and Franklin Government
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.12 times more return on investment than Franklin Government. However, NYSE Composite is 2.12 times more volatile than Franklin Government Securities. It trades about 0.14 of its potential returns per unit of risk. Franklin Government Securities is currently generating about 0.07 per unit of risk. If you would invest 1,804,550 in NYSE Composite on September 3, 2024 and sell it today you would earn a total of 222,654 from holding NYSE Composite or generate 12.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Franklin Government Securities
Performance |
| Timeline |
NYSE Composite and Franklin Government Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Franklin Government Securities
Pair trading matchups for Franklin Government
Pair Trading with NYSE Composite and Franklin Government
The main advantage of trading using opposite NYSE Composite and Franklin Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Franklin Government 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 Government will offset losses from the drop in Franklin Government's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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