Correlation Between Admiral Group and Franklin High

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

By analyzing existing cross correlation between Admiral Group PLC and Franklin High Yield, you can compare the effects of market volatilities on Admiral Group 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 Admiral Group with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Admiral Group and Franklin High.

Diversification Opportunities for Admiral Group and Franklin High

0.55

Correlation Coefficient

Admiral Group  Franklin High

Very weak diversification

The 3 months correlation between Admiral and Franklin is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Admiral Group PLC 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 Admiral Group 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 Admiral Group PLC 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 Admiral Group i.e., Admiral Group and Franklin High go up and down completely randomly.

Pair Corralation between Admiral Group and Franklin High

Assuming the 90 days horizon Admiral Group PLC is expected to generate 5.49 times more return on investment than Franklin High. However, Admiral Group is 5.49 times more volatile than Franklin High Yield. It trades about 0.06 of its potential returns per unit of risk. Franklin High Yield is currently generating about -0.01 per unit of risk. If you would invest  3,500  in Admiral Group PLC on December 5, 2024 and sell it today you would earn a total of  173.00  from holding Admiral Group PLC or generate 4.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Admiral Group PLC  vs.  Franklin High Yield

Admiral Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Admiral Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Admiral Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin High Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Admiral Group and Franklin High

The main advantage of trading using opposite Admiral Group and Franklin High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Admiral Group 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 Admiral Group PLC 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.