Correlation Between Transamerica Capital and Franklin High
Can any of the company-specific risk be diversified away by investing in both Transamerica Capital and Franklin High 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 Transamerica Capital and Franklin High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Capital Growth and Franklin High Yield, you can compare the effects of market volatilities on Transamerica Capital and Franklin High 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 Transamerica Capital with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Capital and Franklin High.
Diversification Opportunities for Transamerica Capital and Franklin High
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Transamerica and Franklin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Capital Growth and Franklin High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Yield and Transamerica Capital 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 Transamerica Capital Growth are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Yield has no effect on the direction of Transamerica Capital i.e., Transamerica Capital and Franklin High go up and down completely randomly.
Pair Corralation between Transamerica Capital and Franklin High
Assuming the 90 days horizon Transamerica Capital Growth is expected to under-perform the Franklin High. In addition to that, Transamerica Capital is 7.18 times more volatile than Franklin High Yield. It trades about -0.08 of its total potential returns per unit of risk. Franklin High Yield is currently generating about -0.39 per unit of volatility. If you would invest 919.00 in Franklin High Yield on October 9, 2024 and sell it today you would lose (20.00) from holding Franklin High Yield or give up 2.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Capital Growth vs. Franklin High Yield
Performance |
| Timeline |
| Transamerica Capital |
| Franklin High Yield |
Transamerica Capital and Franklin High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Capital and Franklin High
The main advantage of trading using opposite Transamerica Capital and Franklin High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Capital position performs unexpectedly, Franklin High 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 High will offset losses from the drop in Franklin High's long position.The idea behind Transamerica Capital Growth and Franklin High Yield 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.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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