Correlation Between Rush Street and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Rush Street 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 Rush Street and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rush Street Interactive and Franklin Natural Resources, you can compare the effects of market volatilities on Rush Street 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 Rush Street with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rush Street and Franklin Natural.
Diversification Opportunities for Rush Street and Franklin Natural
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rush and Franklin is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Rush Street Interactive 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 Rush Street 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 Rush Street Interactive 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 Rush Street i.e., Rush Street and Franklin Natural go up and down completely randomly.
Pair Corralation between Rush Street and Franklin Natural
Considering the 90-day investment horizon Rush Street Interactive is expected to generate 3.15 times more return on investment than Franklin Natural. However, Rush Street is 3.15 times more volatile than Franklin Natural Resources. It trades about 0.27 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 902.00 in Rush Street Interactive on September 2, 2024 and sell it today you would earn a total of 540.00 from holding Rush Street Interactive or generate 59.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rush Street Interactive vs. Franklin Natural Resources
Performance |
| Timeline |
| Rush Street Interactive |
| Franklin Natural Res |
Rush Street and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rush Street and Franklin Natural
The main advantage of trading using opposite Rush Street and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rush Street 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.The idea behind Rush Street Interactive and Franklin Natural Resources 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 Natural vs. Legg Mason Bw | Franklin Natural vs. Qs Large Cap | Franklin Natural vs. Dodge Cox Stock | Franklin Natural vs. Fidelity Series 1000 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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