Correlation Between Franklin Resources and Ares Capital
Can any of the company-specific risk be diversified away by investing in both Franklin Resources and Ares Capital 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 Franklin Resources and Ares Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Resources and Ares Capital, you can compare the effects of market volatilities on Franklin Resources and Ares Capital 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 Franklin Resources with a short position of Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Resources and Ares Capital.
Diversification Opportunities for Franklin Resources and Ares Capital
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Ares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and Franklin Resources 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 Franklin Resources are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of Franklin Resources i.e., Franklin Resources and Ares Capital go up and down completely randomly.
Pair Corralation between Franklin Resources and Ares Capital
Considering the 90-day investment horizon Franklin Resources is expected to under-perform the Ares Capital. In addition to that, Franklin Resources is 2.62 times more volatile than Ares Capital. It trades about -0.01 of its total potential returns per unit of risk. Ares Capital is currently generating about 0.11 per unit of volatility. If you would invest 1,827 in Ares Capital on September 6, 2024 and sell it today you would earn a total of 390.00 from holding Ares Capital or generate 21.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin Resources vs. Ares Capital
Performance |
Timeline |
Franklin Resources |
Ares Capital |
Franklin Resources and Ares Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin Resources and Ares Capital
The main advantage of trading using opposite Franklin Resources and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Resources position performs unexpectedly, Ares Capital 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 Ares Capital will offset losses from the drop in Ares Capital's long position.Franklin Resources vs. BlackRock | Franklin Resources vs. Main Street Capital | Franklin Resources vs. Blackstone Group | Franklin Resources vs. Ares Capital |
Ares Capital vs. Blackstone Group | Ares Capital vs. T Rowe Price | Ares Capital vs. Carlyle Group | Ares Capital vs. BlackRock |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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