Correlation Between Franklin Resources and Chubb

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

By analyzing existing cross correlation between Franklin Resources and Chubb, you can compare the effects of market volatilities on Franklin Resources and Chubb 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 Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Resources and Chubb.

Diversification Opportunities for Franklin Resources and Chubb

-0.18

Correlation Coefficient

Franklin Resources  Chubb

Good diversification

The 3 months correlation between Franklin and Chubb is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb 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 Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Franklin Resources i.e., Franklin Resources and Chubb go up and down completely randomly.

Pair Corralation between Franklin Resources and Chubb

Considering the 90-day investment horizon Franklin Resources is expected to under-perform the Chubb. In addition to that, Franklin Resources is 1.55 times more volatile than Chubb. It trades about 0.0 of its total potential returns per unit of risk. Chubb is currently generating about 0.11 per unit of volatility. If you would invest  27,454  in Chubb on December 28, 2024 and sell it today you would earn a total of  2,382  from holding Chubb or generate 8.68% return on investment over 90 days.

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

Franklin Resources  vs.  Chubb

Franklin Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Franklin Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Chubb

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Chubb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Franklin Resources and Chubb

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

The idea behind Franklin Resources and Chubb 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.