Correlation Between Inverse Government and Franklin Convertible
Can any of the company-specific risk be diversified away by investing in both Inverse Government and Franklin Convertible 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 Inverse Government and Franklin Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Government Long and Franklin Vertible Securities, you can compare the effects of market volatilities on Inverse Government and Franklin Convertible 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 Inverse Government with a short position of Franklin Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Franklin Convertible.
Diversification Opportunities for Inverse Government and Franklin Convertible
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Inverse and Franklin is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Franklin Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Convertible and Inverse Government 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 Inverse Government Long are associated (or correlated) with Franklin Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Convertible has no effect on the direction of Inverse Government i.e., Inverse Government and Franklin Convertible go up and down completely randomly.
Pair Corralation between Inverse Government and Franklin Convertible
Assuming the 90 days horizon Inverse Government Long is expected to generate 1.89 times more return on investment than Franklin Convertible. However, Inverse Government is 1.89 times more volatile than Franklin Vertible Securities. It trades about 0.06 of its potential returns per unit of risk. Franklin Vertible Securities is currently generating about 0.06 per unit of risk. If you would invest 14,471 in Inverse Government Long on October 14, 2024 and sell it today you would earn a total of 4,477 from holding Inverse Government Long or generate 30.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Government Long vs. Franklin Vertible Securities
Performance |
| Timeline |
| Inverse Government Long |
| Franklin Convertible |
Inverse Government and Franklin Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Government and Franklin Convertible
The main advantage of trading using opposite Inverse Government and Franklin Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Government position performs unexpectedly, Franklin Convertible 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 Convertible will offset losses from the drop in Franklin Convertible's long position.| Inverse Government vs. Basic Materials Fund | Inverse Government vs. Basic Materials Fund | Inverse Government vs. Banking Fund Class | Inverse Government vs. Sp Midcap 400 |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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