Correlation Between Western Asset and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Municipal and Franklin Natural Resources, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin Natural.
Diversification Opportunities for Western Asset and Franklin Natural
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Franklin is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal 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 Western Asset 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 Western Asset Municipal 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 Western Asset i.e., Western Asset and Franklin Natural go up and down completely randomly.
Pair Corralation between Western Asset and Franklin Natural
Assuming the 90 days horizon Western Asset is expected to generate 15.07 times less return on investment than Franklin Natural. But when comparing it to its historical volatility, Western Asset Municipal is 4.08 times less risky than Franklin Natural. It trades about 0.02 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,753 in Franklin Natural Resources on September 4, 2024 and sell it today you would earn a total of 424.00 from holding Franklin Natural Resources or generate 15.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Franklin Natural Resources
Performance |
| Timeline |
| Western Asset Municipal |
| Franklin Natural Res |
Western Asset and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin Natural
The main advantage of trading using opposite Western Asset and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Icon Natural Resources | Western Asset vs. Invesco Energy Fund | Western Asset vs. Dreyfus Natural Resources | Western Asset vs. Gmo Resources |
| Franklin Natural vs. Qs Large Cap | Franklin Natural vs. Western Asset Municipal | Franklin Natural vs. T Rowe Price | Franklin Natural vs. Arrow Managed Futures |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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