Correlation Between PHN Multi and Franklin Large

Can any of the company-specific risk be diversified away by investing in both PHN Multi and Franklin Large 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 PHN Multi and Franklin Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PHN Multi Style All Cap and Franklin Large Cap, you can compare the effects of market volatilities on PHN Multi and Franklin Large 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 PHN Multi with a short position of Franklin Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHN Multi and Franklin Large.

Diversification Opportunities for PHN Multi and Franklin Large

0.98

Correlation Coefficient

PHN Multi  Franklin Large

Almost no diversification

The 3 months correlation between PHN and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding PHN Multi Style All Cap and Franklin Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Large Cap and PHN Multi 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 PHN Multi Style All Cap are associated (or correlated) with Franklin Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Large Cap has no effect on the direction of PHN Multi i.e., PHN Multi and Franklin Large go up and down completely randomly.

Pair Corralation between PHN Multi and Franklin Large

Assuming the 90 days trading horizon PHN Multi is expected to generate 1.06 times less return on investment than Franklin Large. But when comparing it to its historical volatility, PHN Multi Style All Cap is 1.02 times less risky than Franklin Large. It trades about 0.29 of its potential returns per unit of risk. Franklin Large Cap is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  4,327  in Franklin Large Cap on September 5, 2024 and sell it today you would earn a total of  622.00  from holding Franklin Large Cap or generate 14.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

PHN Multi Style All Cap  vs.  Franklin Large Cap

PHN Multi Style

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Multi Style All Cap are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, PHN Multi displayed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Large Cap

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Large Cap are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Franklin Large displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PHN Multi and Franklin Large

The main advantage of trading using opposite PHN Multi and Franklin Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHN Multi position performs unexpectedly, Franklin Large 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 Large will offset losses from the drop in Franklin Large's long position.

The idea behind PHN Multi Style All Cap and Franklin Large Cap 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.