Correlation Between Energy Services and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Energy Services 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 Energy Services and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services Fund and Franklin Natural Resources, you can compare the effects of market volatilities on Energy Services 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 Energy Services with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Franklin Natural.
Diversification Opportunities for Energy Services and Franklin Natural
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENERGY and Franklin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund 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 Energy Services 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 Energy Services Fund 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 Energy Services i.e., Energy Services and Franklin Natural go up and down completely randomly.
Pair Corralation between Energy Services and Franklin Natural
Assuming the 90 days horizon Energy Services Fund is expected to generate 2.72 times more return on investment than Franklin Natural. However, Energy Services is 2.72 times more volatile than Franklin Natural Resources. It trades about 0.18 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.19 per unit of risk. If you would invest 22,290 in Energy Services Fund on August 29, 2024 and sell it today you would earn a total of 2,105 from holding Energy Services Fund or generate 9.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Energy Services Fund vs. Franklin Natural Resources
Performance |
| Timeline |
| Energy Services |
| Franklin Natural Res |
Energy Services and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Franklin Natural
The main advantage of trading using opposite Energy Services and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services 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.| Energy Services vs. Fidelity Advisor Energy | Energy Services vs. Fidelity Advisor Energy | Energy Services vs. HUMANA INC | Energy Services vs. Aquagold International |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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