Correlation Between NYSE Composite and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Franklin Utilities 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 Utilities 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 Utilities Fund, you can compare the effects of market volatilities on NYSE Composite and Franklin Utilities 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 Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Franklin Utilities.
Diversification Opportunities for NYSE Composite and Franklin Utilities
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Franklin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities 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 Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Utilities has no effect on the direction of NYSE Composite i.e., NYSE Composite and Franklin Utilities go up and down completely randomly.
Pair Corralation between NYSE Composite and Franklin Utilities
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.54 times less return on investment than Franklin Utilities. But when comparing it to its historical volatility, NYSE Composite is 1.25 times less risky than Franklin Utilities. It trades about 0.14 of its potential returns per unit of risk. Franklin Utilities Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,152 in Franklin Utilities Fund on September 1, 2024 and sell it today you would earn a total of 431.00 from holding Franklin Utilities Fund or generate 20.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Franklin Utilities Fund
Performance |
| Timeline |
NYSE Composite and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Franklin Utilities Fund
Pair trading matchups for Franklin Utilities
Pair Trading with NYSE Composite and Franklin Utilities
The main advantage of trading using opposite NYSE Composite and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Franklin Utilities 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 Utilities will offset losses from the drop in Franklin Utilities' long position.| NYSE Composite vs. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
| Franklin Utilities vs. Doubleline Emerging Markets | Franklin Utilities vs. Siit Emerging Markets | Franklin Utilities vs. Goldman Sachs Emerging | Franklin Utilities vs. Ab All Market |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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