Correlation Between Pace Smallmedium and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Pace Smallmedium and Franklin Natural 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 Pace Smallmedium and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Smallmedium Value and Franklin Natural Resources, you can compare the effects of market volatilities on Pace Smallmedium and Franklin Natural 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 Pace Smallmedium with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Smallmedium and Franklin Natural.
Diversification Opportunities for Pace Smallmedium and Franklin Natural
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Franklin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Value and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and Pace Smallmedium 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 Pace Smallmedium Value are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of Pace Smallmedium i.e., Pace Smallmedium and Franklin Natural go up and down completely randomly.
Pair Corralation between Pace Smallmedium and Franklin Natural
Assuming the 90 days horizon Pace Smallmedium Value is expected to generate 0.95 times more return on investment than Franklin Natural. However, Pace Smallmedium Value is 1.05 times less risky than Franklin Natural. It trades about 0.04 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about -0.1 per unit of risk. If you would invest 2,149 in Pace Smallmedium Value on September 13, 2024 and sell it today you would earn a total of 14.00 from holding Pace Smallmedium Value or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Smallmedium Value vs. Franklin Natural Resources
Performance |
| Timeline |
| Pace Smallmedium Value |
| Franklin Natural Res |
Pace Smallmedium and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Smallmedium and Franklin Natural
The main advantage of trading using opposite Pace Smallmedium and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Smallmedium position performs unexpectedly, Franklin Natural 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 Natural will offset losses from the drop in Franklin Natural's long position.| Pace Smallmedium vs. Pace Smallmedium Value | Pace Smallmedium vs. Pace International Equity | Pace Smallmedium vs. Ubs Allocation Fund | Pace Smallmedium vs. Ubs Allocation Fund |
| Franklin Natural vs. Vanguard Financials Index | Franklin Natural vs. Prudential Jennison Financial | Franklin Natural vs. John Hancock Financial | Franklin Natural vs. Mesirow Financial Small |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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