Correlation Between Versatile Bond and Franklin Equity
Can any of the company-specific risk be diversified away by investing in both Versatile Bond and Franklin Equity 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 Versatile Bond and Franklin Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Versatile Bond Portfolio and Franklin Equity Income, you can compare the effects of market volatilities on Versatile Bond and Franklin Equity 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 Versatile Bond with a short position of Franklin Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Versatile Bond and Franklin Equity.
Diversification Opportunities for Versatile Bond and Franklin Equity
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Versatile and Franklin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Versatile Bond Portfolio and Franklin Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Equity Income and Versatile Bond 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 Versatile Bond Portfolio are associated (or correlated) with Franklin Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Equity Income has no effect on the direction of Versatile Bond i.e., Versatile Bond and Franklin Equity go up and down completely randomly.
Pair Corralation between Versatile Bond and Franklin Equity
Assuming the 90 days horizon Versatile Bond is expected to generate 11.28 times less return on investment than Franklin Equity. But when comparing it to its historical volatility, Versatile Bond Portfolio is 4.25 times less risky than Franklin Equity. It trades about 0.11 of its potential returns per unit of risk. Franklin Equity Income is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 3,151 in Franklin Equity Income on November 4, 2024 and sell it today you would earn a total of 129.00 from holding Franklin Equity Income or generate 4.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Versatile Bond Portfolio vs. Franklin Equity Income
Performance |
| Timeline |
| Versatile Bond Portfolio |
| Franklin Equity Income |
Versatile Bond and Franklin Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Versatile Bond and Franklin Equity
The main advantage of trading using opposite Versatile Bond and Franklin Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Versatile Bond position performs unexpectedly, Franklin Equity 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 Equity will offset losses from the drop in Franklin Equity's long position.The idea behind Versatile Bond Portfolio and Franklin Equity Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Franklin Equity vs. Global Technology Portfolio | Franklin Equity vs. Blackrock Science Technology | Franklin Equity vs. Technology Ultrasector Profund | Franklin Equity vs. Firsthand Technology Opportunities |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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