Correlation Between Energy Basic and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both Energy Basic and Franklin Utilities 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 Basic and Franklin Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and Franklin Utilities Fund, you can compare the effects of market volatilities on Energy Basic and Franklin Utilities 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 Basic with a short position of Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Franklin Utilities.
Diversification Opportunities for Energy Basic and Franklin Utilities
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities and Energy Basic 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 Basic Materials are associated (or correlated) with Franklin Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Utilities has no effect on the direction of Energy Basic i.e., Energy Basic and Franklin Utilities go up and down completely randomly.
Pair Corralation between Energy Basic and Franklin Utilities
Assuming the 90 days horizon Energy Basic Materials is expected to under-perform the Franklin Utilities. But the mutual fund apears to be less risky and, when comparing its historical volatility, Energy Basic Materials is 1.11 times less risky than Franklin Utilities. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Franklin Utilities Fund is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,501 in Franklin Utilities Fund on September 13, 2024 and sell it today you would lose (24.00) from holding Franklin Utilities Fund or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. Franklin Utilities Fund
Performance |
| Timeline |
| Energy Basic Materials |
| Franklin Utilities |
Energy Basic and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and Franklin Utilities
The main advantage of trading using opposite Energy Basic and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic position performs unexpectedly, Franklin Utilities 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 Utilities will offset losses from the drop in Franklin Utilities' long position.| Energy Basic vs. Morningstar Defensive Bond | Energy Basic vs. Touchstone Premium Yield | Energy Basic vs. Dreyfusstandish Global Fixed | Energy Basic vs. Ab Global Bond |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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