Correlation Between Vanguard Energy and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Vanguard Energy 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 Vanguard Energy and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Energy Index and Franklin Natural Resources, you can compare the effects of market volatilities on Vanguard Energy 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 Vanguard Energy with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Franklin Natural.
Diversification Opportunities for Vanguard Energy and Franklin Natural
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Franklin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Index 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 Vanguard Energy 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 Vanguard Energy Index 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 Vanguard Energy i.e., Vanguard Energy and Franklin Natural go up and down completely randomly.
Pair Corralation between Vanguard Energy and Franklin Natural
Assuming the 90 days horizon Vanguard Energy Index is expected to generate 1.12 times more return on investment than Franklin Natural. However, Vanguard Energy is 1.12 times more volatile than Franklin Natural Resources. It trades about 0.02 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.02 per unit of risk. If you would invest 5,684 in Vanguard Energy Index on October 30, 2024 and sell it today you would earn a total of 667.00 from holding Vanguard Energy Index or generate 11.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Energy Index vs. Franklin Natural Resources
Performance |
| Timeline |
| Vanguard Energy Index |
| Franklin Natural Res |
Vanguard Energy and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Energy and Franklin Natural
The main advantage of trading using opposite Vanguard Energy and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Energy 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.| Vanguard Energy vs. Vanguard Financials Index | Vanguard Energy vs. Vanguard Utilities Index | Vanguard Energy vs. Vanguard Materials Index | Vanguard Energy vs. Vanguard Sumer Staples |
| Franklin Natural vs. Towpath Technology | Franklin Natural vs. Vanguard Information Technology | Franklin Natural vs. Goldman Sachs Technology | Franklin Natural vs. Columbia Global Technology |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |