Correlation Between Real Estate and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Real Estate 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 Real Estate and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Estate Securities and Franklin Natural Resources, you can compare the effects of market volatilities on Real Estate 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 Real Estate with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and Franklin Natural.
Diversification Opportunities for Real Estate and Franklin Natural
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Real and Franklin is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Securities 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 Real Estate 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 Real Estate Securities 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 Real Estate i.e., Real Estate and Franklin Natural go up and down completely randomly.
Pair Corralation between Real Estate and Franklin Natural
Assuming the 90 days horizon Real Estate is expected to generate 2.65 times less return on investment than Franklin Natural. But when comparing it to its historical volatility, Real Estate Securities is 1.13 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 of returns per unit of risk over similar time horizon. If you would invest 3,000 in Franklin Natural Resources on September 2, 2024 and sell it today you would earn a total of 177.00 from holding Franklin Natural Resources or generate 5.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Estate Securities vs. Franklin Natural Resources
Performance |
| Timeline |
| Real Estate Securities |
| Franklin Natural Res |
Real Estate and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Estate and Franklin Natural
The main advantage of trading using opposite Real Estate and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate 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.| Real Estate vs. Jhancock Short Duration | Real Estate vs. Ultra Short Fixed Income | Real Estate vs. Old Westbury Short Term | Real Estate vs. Angel Oak Ultrashort |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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