Correlation Between Two Harbors and Franklin BSP
Can any of the company-specific risk be diversified away by investing in both Two Harbors and Franklin BSP 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 Two Harbors and Franklin BSP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Two Harbors Investment and Franklin BSP Realty, you can compare the effects of market volatilities on Two Harbors and Franklin BSP 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 Two Harbors with a short position of Franklin BSP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and Franklin BSP.
Diversification Opportunities for Two Harbors and Franklin BSP
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Two and Franklin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investment and Franklin BSP Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin BSP Realty and Two Harbors 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 Two Harbors Investment are associated (or correlated) with Franklin BSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin BSP Realty has no effect on the direction of Two Harbors i.e., Two Harbors and Franklin BSP go up and down completely randomly.
Pair Corralation between Two Harbors and Franklin BSP
Assuming the 90 days trading horizon Two Harbors Investment is expected to under-perform the Franklin BSP. In addition to that, Two Harbors is 1.23 times more volatile than Franklin BSP Realty. It trades about -0.14 of its total potential returns per unit of risk. Franklin BSP Realty is currently generating about -0.13 per unit of volatility. If you would invest 2,046 in Franklin BSP Realty on January 15, 2025 and sell it today you would lose (101.00) from holding Franklin BSP Realty or give up 4.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Two Harbors Investment vs. Franklin BSP Realty
Performance |
| Timeline |
| Two Harbors Investment |
| Franklin BSP Realty |
Two Harbors and Franklin BSP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Two Harbors and Franklin BSP
The main advantage of trading using opposite Two Harbors and Franklin BSP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors position performs unexpectedly, Franklin BSP 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 BSP will offset losses from the drop in Franklin BSP's long position.| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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